UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under §240.14a-12
United America Indemnity, Ltd.
(Name of Registrant as Specified in its Charter
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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UNITED
AMERICA INDEMNITY, LTD.
Walker House, 87 Mary Street
George Town, Grand Cayman KY1-9002
Cayman Islands
NOTICE OF ANNUAL GENERAL
MEETING OF SHAREHOLDERS
,
2009
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TIME
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local time, on , 2009.
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PLACE
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ITEMS OF BUSINESS
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(1) To elect seven directors of United America Indemnity,
Ltd. to hold office as specified in the Proxy Statement.
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(2) To ratify the appointment of PricewaterhouseCoopers LLP
as our independent auditor for 2009 and to authorize our Board
of Directors acting through its Audit Committee to set the fees
for PricewaterhouseCoopers LLP.
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(3) To act on various matters concerning Wind River
Reinsurance Company, Ltd.
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(4) To approve the payment of an arrangement fee and a
backstop fee, which we refer to collectively as the
Backstop Fees, to Fox Paine & Company, LLC in
connection with our recently successfully completed rights
offering.
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(5) To transact such other business as may properly be
brought before the Annual General Meeting or any adjournment or
postponement thereof.
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RECORD DATE
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Our Board of Directors has fixed the close of business
on ,
2009 as the record date for the Annual General Meeting. All
shareholders of record at that time are entitled to notice of
and are entitled to vote in person or by proxy at the Annual
General Meeting or any adjournment or postponement thereof.
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IMPORTANT
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It is important that your shares be voted at the Annual General
Meeting. Please MARK, SIGN, DATE, and MAIL your proxy PROMPTLY
in the return envelope provided, even if you plan to attend the
Annual General Meeting. If you later desire to revoke your proxy
for any reason, you may do so in the manner described in the
Proxy Statement.
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By Order of the Board of Directors
Larry A. Frakes
President and Chief Executive Officer
,
2009
TABLE OF
CONTENTS
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i
UNITED
AMERICA INDEMNITY, LTD.
Walker House, 87 Mary Street
George Town, Grand Cayman KY1-9002
Cayman Islands
www.uai.ky
PROXY STATEMENT
,
2009
The Annual General Meeting of Shareholders of United America
Indemnity, Ltd. (UAI or the Company)
will be held
at ,
at ,
local time,
on ,
2009. We are mailing this Proxy Statement on or
about ,
2009 to each holder of our issued and outstanding Class A
common shares and Class B common shares entitled to vote at
the Annual General Meeting in order to furnish information
relating to the business to be transacted at the meeting. We
have mailed our Annual Report to Shareholders for the fiscal
year ended December 31, 2008 with this Proxy Statement. We
have included the Annual Report for informational purposes and
not as a means of soliciting your proxy.
Our Board of Directors has fixed the close of business
on ,
2009 as the record date for the Annual General Meeting. All
shareholders of record at that time are entitled to notice of
and are entitled to vote in person or by proxy at the Annual
General Meeting and any adjournment or postponement thereof.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL GENERAL MEETING TO BE HELD
ON ,
2009:
This Proxy Statement and our 2008 Annual Report are available
at
www. .
VOTING
AND REVOCABILITY OF PROXIES
It is important that your shares be voted at the Annual General
Meeting. Please MARK, SIGN, DATE, and MAIL your proxy PROMPTLY
in the return envelope provided, even if you plan to attend the
Annual General Meeting. If you later desire to revoke your proxy
for any reason, you may do so in the manner described below. The
envelope is addressed to our transfer agent and requires no
postage. If you receive more than one proxy card
because you have multiple accounts you should sign
and return all proxies received to be sure all of your shares
are voted.
On the record
date, Class A
common shares
and
Class B common shares were issued and outstanding. On each
matter voted on at the Annual General Meeting and any
adjournment or postponement thereof, each record holder of
Class A common shares will be entitled to one vote per
share and each record holder of Class B common shares will
be entitled to ten votes per share. The holders of Class A
common shares and the holders of Class B common shares will
vote together as a single class.
The required quorum for the Annual General Meeting consists of
one or more shareholders present in person or by proxy and
entitled to vote that hold in the aggregate at least a majority
of the votes entitled to be cast at the Annual General Meeting.
Our directors are elected by a plurality of the votes cast by
the shareholders present in person or by proxy at the Annual
General Meeting and entitled to vote. Proposal Two, the
ratification of the appointment of PricewaterhouseCoopers, LLP
(PwC), our independent registered public accounting
firm, requires the affirmative vote of a simple majority of the
votes cast by the shareholders present in person or by proxy at
the Annual General Meeting and entitled to vote.
Proposal Three, the approval of various matters concerning
Wind River Reinsurance Company, Ltd., an indirect subsidiary of
UAI
(Wind River), which must be submitted for approval
by our shareholders pursuant to our amended and restated
memorandum and articles of association, requires the affirmative
vote of a majority of the votes cast by the shareholders
entitled to vote and present in person or by proxy at the Annual
General Meeting. Our Board of Directors will cause our corporate
representative or proxy to vote the shares of Wind River at the
Wind River annual general meeting in the same proportion as the
votes received at the Annual General Meeting from our
shareholders on this proposal. Proposal Four regarding
payment of an arrangement fee and a backstop fee, which we refer
to collectively as the Backstop Fees, to Fox
Paine & Company, LLC (Fox Paine &
Company) in connection with our recent successfully
completed rights offering requires the affirmative vote of a
majority of the votes cast by the shareholders entitled to vote
and present in person or by proxy at the Annual General Meeting.
Fox Paine & Company and any of its affiliates will not
vote on this proposal any Class A common shares or
Class B common shares that were purchased pursuant to the
Backstop Agreement discussed below in Proposal Four. The
abstention by Fox Paine & Company and its affiliates
with respect to shares purchased pursuant to the Backstop
Agreement will not have the effect of a vote against
Proposal Four with respect to these shares.
If you mark your proxy as Withhold Authority or
Abstain on any matter, or if you give specific
instructions that no vote be cast on any specific matter, the
shares represented by your proxy will not be voted on that
matter, but will count in determining whether a quorum is
present. Proxies submitted by brokers that do not indicate a
vote for some or all of the proposals because the brokers do not
have discretionary voting authority and have not received
instructions as to how to vote on those proposals (so called
broker non-votes) are also considered in determining
whether a quorum is present, but will not affect the outcome of
any vote.
You may vote your shares at the Annual General Meeting in person
or by proxy. All valid proxies received before the Annual
General Meeting will be voted according to their terms. If you
complete your proxy properly, but do not provide instructions as
to how to vote your shares, your proxy will be voted as follows:
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FOR the election of all nominees for director of UAI
named herein.
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FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent auditor for 2009
and the authorization of our Board of Directors acting through
its Audit Committee to set the fees for PricewaterhouseCoopers
LLP.
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FOR each of the various matters concerning Wind
River, including the election of all nominees for director and
alternate director named herein.
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FOR the approval of the payment of the Backstop Fees
to Fox Paine & Company in connection with our recently
successfully completed rights offering.
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Except as discussed under Proposal Three
Various Matters Concerning Wind River Reinsurance Company,
Ltd., if any other business is brought before the Annual
General Meeting, proxies will be voted, to the extent permitted
by the rules and regulations of the Securities and Exchange
Commission, in accordance with the judgment of the persons
voting the proxies. After providing your proxy, you may revoke
it at any time before it is voted at the Annual General Meeting
by (1) filing with our Chief Executive Officer an
instrument revoking it or a duly executed proxy bearing a later
date, or (2) by attending the Annual General Meeting and
giving notice of revocation. Attendance at the Annual General
Meeting, by itself, will not constitute revocation of a proxy.
We will bear the cost of preparing and soliciting proxies,
including the reasonable charges and expenses of brokerage firms
or other nominees for forwarding proxy materials to
shareholders. In addition to solicitation by mail, certain of
our directors, officers, and employees may solicit proxies
personally or by telephone or other electronic means without
extra compensation, with the exception of reimbursement for
actual expenses incurred in connection with the solicitation.
The enclosed proxy is solicited by and on behalf of our Board of
Directors.
2
PROPOSAL ONE:
ELECTION OF OUR DIRECTORS
Our amended and restated memorandum and articles of association
provide that the size of our Board of Directors shall be
determined from time to time by our Board of Directors, but
unless such number is so fixed, our Board of Directors will
consist of eleven directors. Our Board of Directors has fixed
the size of our Board of Directors at seven directors effective
following the Annual General Meeting and has nominated seven
persons for election as directors whose terms will expire at the
2010 Annual General Meeting of Shareholders, or when their
successors are duly elected and qualified. If any of the
nominees becomes unable to or declines to serve as a director
prior to election at the Annual General Meeting, the persons
named in the accompanying proxy shall have discretionary
authority to vote for a substitute or substitutes as the Board
of Directors may nominate.
Upon the recommendation from our Nominating and Governance
Committee our Board of Directors has nominated the seven
individuals listed below.
Nominees
for Director
Set forth below is biographical information concerning the
persons nominated for election as directors of UAI:
Saul A. Fox,
56, has served as a director on our Board of
Directors since August 2003, as our Chairman since September
2003, as our Chief Executive Officer from February 2007 to June
2007, and as Chief Executive of Fox Paine & Company,
LLC a private equity firm, since he co-founded Fox
Paine & Company in 1997. In addition to managing Fox
Paine & Company, Mr. Fox led Fox
Paine & Companys acquisitions of our predecessor
companies, United National and Penn America, as well as numerous
other acquisitions in such areas as energy, independent power
generation, medical devices, and geophysical software. Prior to
founding Fox Paine & Company, Mr. Fox was a
general partner of Kohlberg, Kravis &
Roberts & Co. (KKR), a global alternative
asset manager. During his thirteen years with KKR, Mr. Fox
was instrumental in numerous acquisition and financing
transactions as well as leading that firms investment
efforts in insurance, reinsurance, energy, power, and lodging,
including KKRs highly successful acquisitions of American
Reinsurance and Canadian General Insurance (KKRs first
acquisition outside of the United States), serving these
companies as their Chairman of the Board of Directors or
Chairman of the Boards Executive Committee. Prior to
joining KKR, Mr. Fox was an attorney at Latham &
Watkins LLP, specializing in tax law, business law, and mergers
and acquisitions. Mr. Fox received a B.S. in Communications
from Temple University in 1975 (summa cum laude) and a J.D. from
the University of Pennsylvania School of Law in 1978 (cum
laude). Mr. Fox is currently Chairman of the Board of
Directors of Paradigm B.V., LArtisan Parfumeur, Erno
Laszlo and Penhaligons, and a member of the Board of
Overseers for the University of Pennsylvania Law School and the
Hoover Institute. Mr. Fox was nominated for election as a
director by Fox Paine & Company pursuant to its rights
under the Amended and Restated Shareholders Agreement dated as
of December 15, 2003, as further amended by Amendment
No. 1 to the Amended and Restated Shareholders Agreement
dated as of April 10, 2006, among United National Group,
Ltd. (now United America Indemnity, Ltd.), Fox Paine &
Company and the Ball family trusts (the Shareholders
Agreement).
Larry A. Frakes,
57, has served as a director on our
Board of Directors since April 2007. Mr. Frakes served as
President and Chief Executive Officer of Everest National
Insurance Company, which specializes in primary program
insurance opportunities written through underwriting managers
and is a subsidiary of Everest Re Group, Ltd. (NYSE:RE),
from June 2001 through January 2007 and as President from June
1997 through June 2001. From November 1996 through June 1997,
Mr. Frakes served as an Executive Vice President of Everest
National Insurance Company. During his tenure at Everest
National Insurance Company, he also served as an officer and
director of various affiliated companies. Prior to joining
Everest National Insurance Company in 1996, Mr. Frakes
served as Senior Vice President and Director of Empire Insurance
Group from November 1991 through November 1996. From 1970
through 1991, Mr. Frakes held various positions with CIGNA.
Mr. Frakes received a B.S. in Business Administration from
Northern Kentucky University in 1976.
3
Stephen A. Cozen,
70, has served as a director on our
Board of Directors since May 2004. Mr. Cozen is the founder
and has been Chairman of Cozen OConnor, a
Philadelphia-based law firm specializing in insurance related
and commercial litigation, since 1970. Mr. Cozen is a
Fellow in the American College of Trial Lawyers and was formerly
an officer and director of the Federation of Defense and
Corporate Counsel. Mr. Cozen serves on numerous boards of
educational and philanthropic organizations, including the
Kimmel Center for Performing Arts in Philadelphia, the
Federation of Jewish Agencies, the National Museum of American
Jewish History, the University of Pennsylvanias Institute
for Law and Economics and its Law Schools Board of
Overseers. In 2002, he was elected to the reconstituted Board of
Directors for the Shoah Foundation and was awarded the
Anti-Defamation Leagues highest honor the
25th Annual Americanism Award. Mr. Cozen is also a
director of Assured Guaranty Ltd., a financial guarantee insurer
headquartered in Bermuda. Mr. Cozen was nominated for
election as a director by Fox Paine & Company pursuant
to its rights under the Shareholders Agreement.
James R. Kroner,
47, has served as a director on our
Board of Directors since August 2007. Until December 2005 when
he retired, Mr. Kroner was Chief Financial Officer and
Chief Investment Officer of Endurance Specialty Holdings Ltd., a
publicly traded insurance and reinsurance company, which he
co-founded in 2001. Mr. Kroner served as a member of
Endurances executive committee and on the companys
Board of Directors. Prior to his tenure at Endurance,
Mr. Kroner was a Managing Director at Fox Paine &
Company from 1999 to 2001. Previously, Mr. Kroner was with
American Re Corporation, a reinsurance company, as Senior Vice
President, Treasurer, and a member of the executive committee,
where he headed American Res direct investment function
and managed a portfolio of $110 million in private equity
investments. In addition, Mr. Kroner was a senior insurance
industry investment banker for a number of years. He served as a
Managing Director and co-head of insurance industry investment
banking in the Americas for JP Morgan & Co. and as a
Managing Director focused on insurance industry mergers and
acquisitions at Salomon Smith Barney. Mr. Kroner currently
serves on the Board of Directors of Terra Industries Inc.
Mr. Kroner was nominated for election as a director by Fox
Paine & Company pursuant to its rights under the
Shareholders Agreement.
Michael J. Marchio,
62, has served as a director on our
Board of Directors since November 2007. Mr. Marchio retired
from full-time employment as Worldwide Director of Claims,
Executive Vice President in 2006 after more than 35 years
with Chubb & Son, a property and casualty insurance
company. Mr. Marchio currently serves as a consultant to
Chubb on a limited basis. From 1996 through 2006,
Mr. Marchio served on the Crohns and Colitis
Foundation Board of Trustees. From 2004 through 2006,
Mr. Marchio was the Vice Chair of the American Insurance
Association of Executive Claims Committee. From 1994 through
1999, Mr. Marchio was the Chair of the American Excess
Claims Committee. Mr. Marchio was nominated for election as
a director by Fox Paine & Company pursuant to its
rights under the Shareholders Agreement.
Seth J. Gersch,
61, has served as a director on our Board
of Directors since February 2008. Mr. Gersch is currently
the Chief Operating Officer of Fox Paine & Company,
which he joined in 2007. Prior to joining Fox Paine &
Company, Mr. Gersch was the Chief Operating Officer and a
member of the Executive Committee of ThinkEquity Partners, LLC,
an investment bank, from 2004 through 2007. From 2002 through
2004, Mr. Gersch was President and Chief Executive Officer
of Presidio Capital Advisors, LLC, a financial advisory services
firm. In addition, Mr. Gersch held several positions with
Banc of Americas predecessor organization, Montgomery
Securities, and founded the BrokerDealer Services Division of
Banc of America Securities where he served as President and
Chief Executive Officer. Mr. Gersch is a member of the
Board of Directors of the San Francisco 49ers Foundation,
the charitable arm of the San Francisco 49ers football
organization. Mr. Gersch was nominated for election as a
director by Fox Paine & Company pursuant to its rights
under the Shareholders Agreement.
Chad A. Leat,
53, has served as a director on our Board
of Directors since February 2009. Mr. Leat is currently the
Managing Director and Chairman of Citis Global Alternative
Asset Group, which encompasses the Firms Financial
Entrepreneur and Infrastructure Investment Banking businesses.
Mr. Leat is also Vice Chairman of Capital Market
Origination and sits on the firms Investment Banking
Divisions Operating Committee. In 2006 and 2007, he served
as Co-Head of Global Credit Markets for Citi Markets and
Banking. From 1998 to 2005, he served as the Global Head of
Loans and Leveraged Finance. Under the leadership of
4
Mr. Leat, Citigroup has become the leading bond and loan
house in the world. Mr. Leat joined Salomon Brothers in
1997 after spending more than 12 years at Chase Manhattan,
where he headed up their highly successful Syndications,
Structured Sales and Loan Trading businesses. Mr. Leat is a
graduate of the University of Kansas, where he received his
Bachelors of Science. He is a member of the Economics Club of
New York and a member of the Board of Directors of The Hampton
Classic Horse Show and the Hetrick-Martin Institute.
Board and
Board Committee Information
Meetings
and Independence Requirements
Our Board of Directors held five meetings in 2008 and took
actions by unanimous written consent, as needed. In 2008, all of
members of the Board of Directors attended 75% or more of the
total number of meetings of our Board of Directors and the total
number of meetings held by committees on which they served which
were held during the period for which they were directors.
The Annual General Meeting will be our sixth annual general
meeting of shareholders. We do not have a policy about
directors attendance at our annual meeting of
shareholders. No director attended our 2008 Annual General
Meeting.
UAI is a controlled company as defined in
Rule 5615(c)(1) of the NASDAQ Marketplace Rules because
more than 50% of our voting power is held by Fox
Paine & Company. See Additional
Information Principal Shareholders and Security
Ownership of Management. Therefore, we are exempt from
certain requirements of Rule 5605 with respect to
(1) having a majority of independent directors on our Board
of Directors, (2) having the compensation of our executive
officers determined by a majority of independent directors or a
compensation committee composed solely of independent directors,
and (3) having nominees for director selected or
recommended for selection by either a majority of independent
directors or a nominating committee composed solely of
independent directors.
Audit
Committee
The Audit Committee held four meetings in 2008 and took actions
by unanimous written consent, as needed. The Audit Committee
currently consists of Chad A. Leat, James R. Kroner and Michael
J. Marchio, with the appointment of Mr. Leat effective
February 9, 2009. Mr. Duszak served as a member of the
Audit Committee and as Chair of the Audit Committee until his
resignation from the Board of Directors, which was effective
November 28, 2008. Robert S. Fleischer served as a member
of the Audit Committee from February 9, 2009 until his
resignation from the Board of Directors, which was effective
June 8, 2009. Mr. Leat is currently the Chair of the
Audit Committee.
Our Board of Directors has determined that Messrs. Leat,
Kroner and Marchio each qualify as independent
directors as that term is defined in the NASDAQ
Marketplace Rules and the rules of the Securities and Exchange
Commission. Our Board of Directors has also determined that all
three members of the Audit Committee satisfy the financial
literacy requirements of the NASDAQ Marketplace Rules and that
Mr. Leat qualifies as an audit committee financial
expert as defined by the rules of the Securities and
Exchange Commission. Please see Mr. Leats
biographical information under the heading Nominees for
Director above for his relevant experience.
The principal duties of the Audit Committee are to oversee our
accounting and financial reporting processes and the audit of
our financial statements, to select and retain our independent
auditor, to review with management and our independent auditor
our annual financial statements and related footnotes, to review
our internal audit activities, to review with our independent
registered public accounting firm the planned scope and results
of the annual audit and its reports and recommendations, and to
review with the independent auditor matters relating to our
system of internal controls.
A copy of our Audit Committee Charter is available on our
website at www.uai.ky.
5
Compensation
Committee
The Compensation Committee held four meetings in 2008 and took
actions by unanimous written consent, as needed. The
Compensation Committee currently consists of Stephen A. Cozen,
Saul A. Fox, and Michael J. Marchio. Mr. Cozen is Chair of
the Compensation Committee.
The primary duties of the Compensation Committee are to
formulate, evaluate, and approve the compensation of our
executive officers and to oversee all equity compensation
programs. The Compensation Committee also reviews and approves
any forms of employment contracts, severance arrangements,
change in control provisions, and other compensatory
arrangements with our executive officers.
The Compensation Committee meets several times each year in
conjunction with regularly-scheduled Board meetings and as
needed at other times. Its meetings are chaired by a member of
the Compensation Committee. Management participates in meetings
at the invitation of the Compensation Committee, providing
financial data on which compensation decisions are based,
publicly-available compensation data with respect to our
competitors, and updates on legal developments affecting
compensation. Management may also propose financial targets on
which performance will be judged. Generally, at each meeting an
executive session is held without members of management present.
In the course of its activities, the Compensation Committee may
appoint a subcommittee consisting of one or more of its members
with respect to particular tasks. The members of the
Compensation Committee also make recommendations to the Board of
Directors regarding non-employee director compensation, albeit
through their service as the members of our Nominating and
Governance Committee.
With respect to performance-based compensation, our management
proposes a budget for the upcoming year which is subject to
Board of Directors review and approval. The Compensation
Committee then establishes compensation opportunities (both on
an annual and long-term basis) for our executive officers based
on the Board-approved targets, subject to the subsequent
approval of the Section 162(m) Committee, and evaluates and
approves compensation on the basis of this achievement.
Establishment of goals for a particular year and evaluation of
achievement relative to the prior year generally take place in
the first quarter of each calendar year.
The Compensation Committee periodically evaluates the
competitiveness of our executive compensation programs, using
information drawn from a variety of sources such as published
survey data on similarly-sized companies within the industry in
which we operate, information supplied by independent
consultants and management, and its own experience in recruiting
and retaining executives. The Compensation Committee has the
authority to retain outside advisors and consultants in
connection with its activities, and has the sole authority to
approve any such advisors and consultants fees.
Further discussion regarding the Compensation Committees
processes for setting executive compensation is set forth under
Additional Information Compensation Discussion
and Analysis Our Compensation Philosophy.
A copy of our Compensation Committee Charter is available on our
website at www.uai.ky.
Section 162(m)
Committee
The Section 162(m) Committee held one meeting in 2008 and
took actions by unanimous written consent, as needed. The
Section 162(m) Committee currently consists of two
directors who are non-employee directors for
purposes of
Rule 16b-3
of the Securities Exchange Act of 1934 (the Exchange
Act) and outside directors under
Section 162(m) of the Internal Revenue Code
Messrs. Kroner, and Marchio. Mr. Duszak served as a
member of the Section 162(m) Committee and as Chair of the
Section 162(m) Committee until his resignation, which was
effective November 28, 2008. Mr. Kroner is currently
the Chair of the Section 162(m) Committee.
Mr. Fleischer served as a member of the Section 162(m)
Committee from February 10, 2009 until his resignation,
which was effective June 8, 2009.
The primary purpose of the Section 162(m) Committee is to
oversee our policies on structuring compensation programs for
executive officers in order to preserve tax deductibility and,
as and when required,
6
to establish and certify the attainment of performance goals
pursuant to Section 162(m) of the Internal Revenue Code.
The Section 162(m) Committee may also approve grants of
equity compensation to our executive officers.
The Section 162(m) Committee meets during the year to
establish targets and to review and certify achievement with
respect to previously-established targets and as needed at other
times. Its meetings are chaired by a member of the
Section 162(m) Committee and are occasionally held in
executive session without members of management present.
Management and members of the Compensation Committee may
participate in Section 162(m) Committee meetings at the
invitation of the Section 162(m) Committee, providing
financial data on which compensation decisions are based,
publicly available compensation data with respect to our
competitors, and updates on legal developments affecting
compensation. Management and members of the Compensation
Committee may also propose financial targets on which
performance will be judged.
A copy of our Section 162(m) Committee Charter is available
on our website at www.uai.ky.
Nominating
and Governance Committee
The Nominating and Governance Committee held five meetings in
2008 and took actions by unanimous written consent, as needed.
The Nominating and Governance Committee currently consists of
Saul A. Fox, Stephen A. Cozen and Seth J. Gersch. Mr. Fox
is Chair of the Nominating and Governance Committee. The
principal duties of the Nominating and Governance Committee are
to recommend to the Board of Directors nominees for directors
and directors for Board of Directors committee membership, to
develop and recommend to the Board of Directors a set of
corporate governance policies for UAI, to establish criteria for
recommending new directors, and to identify, screen, and recruit
new directors.
A copy of our Nominating and Governance Committee Charter is
available on our website at www.uai.ky.
Additional
Board Committees
Our Board of Directors has also established an Executive
Committee and an Investment Committee.
Executive
Committee
The Executive Committee currently consists of Saul A. Fox,
Stephen A. Cozen, and Larry A. Frakes. Mr. Fox is Chair of
the Executive Committee. The Executive Committee has the
authority between meetings of the full Board of Directors to
exercise the powers of the Board of Directors, other than those
reserved for committees or the full Board of Directors.
A copy of our Executive Committee Charter is available on our
website at www.uai.ky
Investment
Committee
The Investment Committee currently consists of Saul A. Fox, Seth
J. Gersch, James R. Kroner, and Chad A. Leat, with the
appointment of Mr. Leat effective February 9, 2009.
Until Mr. Kroners appointment to the Investment
Committee, which was effective April 25, 2008,
Mr. Frakes served as a member of the Investment Committee.
The principal duties of the Investment Committee are to
establish and review our investment guidelines and to review our
investments to ensure compliance with our investment guidelines.
Mr. Kroner is the Chair of the Investment Committee.
A copy of our Investment Committee Charter is available on our
website at www.uai.ky
Shareholder
Nominations to our Board of Directors and Other Shareholder
Communications
The Board of Directors considers the recommendations of the
Nominating and Governance Committee with respect to the
nominations of directors, but otherwise retains authority over
the identification of such nominees. The Nominating and
Governance Committee does not solicit recommendations from
shareholders regarding director nominee candidates, but will
consider any such recommendation received in writing and
accompanied by sufficient information to enable the Nominating
and Governance Committee to assess a
7
candidates qualifications, along with confirmation of a
candidates consent to serve as a director if elected.
Candidates for our Board of Directors are considered based upon
various criteria, such as their broad-based business and
professional skills and experiences, a global business and
social perspective, concern for the long-term interests of the
shareholders, and personal integrity and judgment.
Recommendations for director nominees should be sent to the
Nominating and Governance Committee
c/o United
America Indemnity, Ltd., Walker House, 87 Mary Street, George
Town, Grand Cayman KY1-9002, Cayman Islands or
e-mailed
to
info@uai.ky. The written recommendation should be submitted in
the time frame described under the caption Shareholder
Proposals below.
Our Board of Directors also has implemented a process whereby
shareholders may send communications directly to its attention.
Any shareholders desiring to communicate with our Board of
Directors, or one or more specific members of our Board of
Directors, should communicate in writing addressed to the
specified addressees
c/o United
America Indemnity, Ltd., Walker House, 87 Mary Street, George
Town, Grand Cayman KY1-9002, Cayman Islands or in an
e-mail
to
info@uai.ky.
Director
Compensation
From
January 1, 2008 through July 21, 2008
The amount of the Annual Retainer Non-Employee Directors were
eligible to receive was: (1) $50,000 for the Chairman;
(2) $50,000 for all Non-Employee Directors; (3) an
additional $30,000 for Non-Employee Directors who serve on the
Audit Committee in a capacity other than Chairperson of such
Committee; (4) an additional $30,000 for Non-Employee
Directors who serve on the Investment Committee in a capacity
other than Chairperson of such Committee; (5) an additional
$40,000 for the Non-Employee Director who chairs the
Compensation Committee; (6) an additional $60,000 for the
Non-Employee Director who chairs the Audit Committee; and
(7) an additional $40,000 for the Non-Employee Director who
chairs the Investment Committee. All Non-Employee Directors
receive (a) $5,000 for each Board of Directors meeting
attended and each meeting of any committee of the Board of
Directors attended in person; and $1,000 for each Board of
Directors meeting attended and each meeting of any committee of
the Board of Directors attended by telephonic means and
(b) reimbursement for their reasonable
out-of-pocket
expenses incurred in attending meetings of the Board of
Directors and its committees.
Shares paid to a Non-Employee Director were fully vested upon
the applicable Payment Date, but may not be transferred, sold or
otherwise disposed of earlier than the occurrence of (1) a
change in control of UAI, (2) such Non-Employee
Directors death or (3) the one-year anniversary after
a Directors service on our Board of Directors ceases.
These Shares are issued under our Share Incentive Plan.
From
July 22, 2008 through December 31, 2008
The amount of the Annual Retainer Non-Employee Directors were
eligible to receive was: (1) $75,000 for the Chairman;
(2) $65,000 for all Non-Employee Directors; (3) an
additional $30,000 for Non-Employee Directors who serve on the
Audit Committee in a capacity other than Chairperson of such
Committee; (4) an additional $30,000 for Non-Employee
Directors who serve on the Investment Committee in a capacity
other than Chairperson of such Committee; (5) an additional
$30,000 for Non-Employee Directors who serve on the Nominating
in Governance Committee; (6) an additional $50,000 for the
Non-Employee Director who chairs the Compensation Committee;
(7) an additional $65,000 for the Non-Employee Director who
chairs the Audit Committee; and, (8) an additional $50,000
for the Non-Employee Director who chairs the Investment
Committee. All Non-Employee Directors receive (a) $5,000
for each Board of Directors meeting attended and each meeting of
any committee of the Board of Directors attended in person; and
$1,000 for each Board of Directors meeting attended and each
meeting of any committee of the Board of Directors attended by
telephonic means (such monies and Annual Retainer, together with
the monies and Annual Retainer paid from January through
July 21, 2008 set forth above, Fees); and
(b) reimbursement for their reasonable
out-of-pocket
expenses incurred in attending meetings of the Board of
Directors and its committees.
8
Payment
All Fees were paid in either (1) cash, (2) a
combination of cash and Class A common shares, or
(3) 100% Class A common shares, at the option of the
Non-Employee Director. The number of Class A common shares
was determined by dividing the product of compensation to be
issued by the closing market price of Class A common shares
on the NASDAQ Global Select Market on the last business day of
the preceding calendar quarter. The amount paid to a
Non-Employee Director included an additional cash payment (a
gross-up)
for the payment of (1) the par value ($.0001) for each
Class A common share awarded and (2) the percentage of
all applicable federal and state withholdings that corresponds
with the Non-Employee Directors election to receive 100%
of his compensation in Class A common shares.
Shares paid to a Non-Employee Director were fully vested upon
the applicable Payment Date, but may not be transferred, sold or
otherwise disposed of earlier than the occurrence of (1) a
change in control of UAI, (2) such Non-Employee
Directors death or (3) the one-year anniversary after
a Directors service on our Board of Directors ceases.
These Shares are issued under our Share Incentive Plan.
The following table provides compensation information for the
one year period ended December 31, 2008 for each member of
our Board of Directors.
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Change in
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Pension
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Value and
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Fees
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Nonqualified
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Earned
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Non-Equity
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Deferred
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or Paid in
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Name
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Cash(1)
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Awards(2)
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Awards
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Compensation
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Earnings
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Compensation(3)
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Total
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Saul A. Fox
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$
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2
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$
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264,165
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$
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281,351
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$
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545,518
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Larry A. Frakes(4)
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Stephen A. Cozen
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27,001
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147,362
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121,361
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295,724
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Richard L. Duszak(5)
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1
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142,201
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122,750
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264,952
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Seth J. Gersch(6)
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1
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162,460
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173,228
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335,689
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James R. Kroner
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36,754
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146,686
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101,809
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285,249
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Michael J. Marchio
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1
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151,644
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130,627
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282,272
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Justin R. Reyna(7)
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165
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110
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275
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(1)
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Includes the par value ($.0001) for each share awarded and cash
component of director fees.
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(2)
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Represents share based compensation in accordance with
SFAS 123R.
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(3)
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Includes
tax-gross
up.
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(4)
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Mr. Frakes does not earn fees for his service as a
Director. Please see the Compensation Discussion and Analysis
and the Summary Compensation Table for disclosure related to
Mr. Frakes, who is also our President and Chief Executive
Officer.
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(5)
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Mr. Duszak resigned from our Board of Directors effective
November 28, 2008.
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(6)
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Mr. Gersch was appointed to our Board of Directors
effective February 4, 2008.
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(7)
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Mr. Reyna resigned from our Board of Directors effective
January 2, 2008.
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Required
Vote
The seven nominees receiving the highest number of votes cast by
the shareholders present in person or by proxy at the Annual
General Meeting will be elected directors.
THE BOARD
OF DIRECTORS RECOMMENDS VOTING FOR
THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR
9
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
General
The appointment of an independent registered public accounting
firm is approved annually by the Audit Committee. The Audit
Committee reviews both the audit scope and estimated fees for
professional services for the coming year. The Audit Committee
of the Board of Directors has appointed PricewaterhouseCoopers
LLP (PwC) as our independent auditor for 2009. As a
matter of good corporate governance, the Audit Committee submits
its selection of the independent registered public accounting
firm to our shareholders for ratification at the Annual General
Meeting. In addition, shareholders will be asked to authorize
our Board of Directors acting through its Audit Committee to set
the fees for PwC. If the shareholders do not ratify the
appointment of PwC, the selection of our independent registered
public accounting firm will be reconsidered by the Audit
Committee.
A representative of PwC is expected to be available
telephonically to respond to appropriate questions from
shareholders. The representative will also have the opportunity
to make a statement if he or she desires.
Information
Regarding Our Independent Registered Public Accounting
Firm
The following table shows the fees that were billed to us by PwC
for professional services rendered for the fiscal years ended
December 31, 2008 and December 31, 2007.
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Fee Category
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2008
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2007
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Audit Fees
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$
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1,046,270
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$
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1,138,700
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Audit-Related Fees
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Tax Fees
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251,827
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270,577
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All Other Fees
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9,500
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11,500
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Total Fees
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$
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1,307,597
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$
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1,420,777
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Audit
Fees
This category includes fees for the audit of our annual
financial statements and review of interim quarterly financial
statements included on our quarterly reports on
Form 10-Q
and services that are normally provided by PwC in connection
with statutory and regulatory filings or engagements.
Audit-Related
Fees
This category includes fees for assurance and related services
that are reasonably related to the performance of the audit or
review of our financial statements and are not included above
under Audit Fees. This category would include fees
for services performed in connection with audits of our 401(k)
plans and review of our registration statements and
prospectuses. For 2008 and 2007, no fees were paid to PwC for
such services.
Tax
Fees
This category includes fees for tax compliance, tax advice, and
tax planning. The services provided included tax advice and
assistance with tax compliance and reporting to federal, state
and foreign taxing authorities.
All
Other Fees
This category includes fees for products and services provided
by PwC that are not included in the categories described above.
For 2008 and 2007, the amount of All Other Fees
consists of fees for on-line accounting research services and
compensation surveys, as well as consulting work surrounding the
amalgamation of our Bermuda and Barbados insurance entities.
10
Pre-Approval
of Services
To ensure that our independent registered public accounting firm
maintains the highest level of independence, the Audit Committee
is required to pre-approve the audit and non-audit services
performed by our independent registered public accounting firm.
The Audit Committee preapproved 100% of the fees for non-audit
services performed by PwC during the year ended
December 31, 2008. To assure that the provision of these
services does not impair the independence of PwC, unless a type
of service to be provided by PwC has been pre-approved in
accordance with the Audit Committee Pre-Approval Policy, the
Audit Committees separate pre-approval is required. Any
proposed services exceeding the pre-approved cost levels set
forth in the Audit Committee Pre-Approval Policy require the
Audit Committees separate pre-approval. The Audit
Committee Pre-Approval Policy only applies to services provided
to us by our independent registered public accounting firm; it
does not apply to similar services performed by persons other
than our independent registered public accounting firm. The term
of any pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee specifically provides
for a different period. The Audit Committee will at least
annually, or more often as it deems necessary in its judgment,
reassess and revise the Audit Committee Pre-Approval Policy. The
Audit Committee most recently reassessed and approved its Audit
Committee Pre-Approval Policy in October 2008.
Required
Vote
The affirmative vote of a simple majority of the votes cast by
the shareholders present in person or by proxy at the Annual
General Meeting will be required for the ratification of the
appointment of PwC as our independent auditor for 2009 and the
authorization of our Board of Directors acting through its Audit
Committee to set fees for PwC.
THE BOARD
OF DIRECTORS RECOMMENDS VOTING FOR RATIFICATION OF
THE APPOINTMENT OF PWC AS OUR INDEPENDENT AUDITOR FOR 2009 AND
THE AUTHORIZATION OF OUR BOARD OF DIRECTORS ACTING THROUGH ITS
AUDIT COMMITTEE TO SET THE FEES FOR PWC.
11
PROPOSAL THREE:
VARIOUS MATTERS CONCERNING
WIND RIVER REINSURANCE COMPANY, LTD.
General
Under our amended and restated memorandum and articles of
association, if we are required or entitled to vote at a general
meeting of certain of our
non-U.S. subsidiaries,
our Board of Directors must refer the matter to our shareholders
and seek authority from our shareholders for our corporate
representative or proxy to vote in favor of the resolutions
proposed by these subsidiaries. We are submitting the matters
described below concerning our subsidiary, Wind River to our
shareholders for their approval at the Annual General Meeting.
Our Board of Directors will cause our corporate representative
or proxy to vote our shares in Wind River in the same proportion
as the votes received at the Annual General Meeting from our
shareholders on the matters proposed by this subsidiary, which
require the affirmative vote of a majority of the votes cast by
the shareholders entitled to vote and present in person or by
proxy at the Annual General Meeting.
We are the sole shareholder of Wind River. It is proposed that
we be authorized to vote in favor of the following matters at
the annual general meeting of Wind River.
Proposal 3(A)
Election of Directors and Alternate Director
The board of directors of Wind River has nominated three persons
for election as directors and one person for election as an
alternate director whose terms will expire at the 2010 annual
general meeting of shareholders of Wind River, or when their
successors are duly elected and qualified. If any of the
nominees becomes unable to or declines to serve prior to the
election at the annual general meeting of Wind River, the
persons named in the accompanying proxy shall have discretionary
authority to vote for a substitute or substitutes as the board
of directors of Wind River may nominate.
Set forth below is biographical information concerning the
persons nominated for election as directors of Wind River
Alan Bossin,
58, has served on the board of directors of
Wind River since October 2003 and as counsel at Appleby Hunter
Bailhache, a Hamilton, Bermuda based law firm, since 1999. Prior
to joining Appleby Hunter Bailhache, Mr. Bossin served as a
lawyer at Blaney McMurty Stapells Friedman, a Toronto, Canada
based law firm. From 1987 through 1998, Mr. Bossin was
employed by the global insurance broker Johnson &
Higgins Ltd (later Marsh & McLennan) as Canadian
general counsel, and from 1983 through 1986, Mr. Bossin
served as counsel at Insurance Bureau of Canada, the Toronto,
Canada based national property and casualty insurance trade
association. Mr. Bossin attended the University of Guelph
and obtained an LL.B. from the University of Windsor in 1979. He
is a member of both the Law Society of Upper Canada and the
Bermuda Bar.
Larry A. Frakes.
Mr. Frakes has served on
the board of directors of Wind River since April 2007. For
additional information, see the biographical information for
Mr. Frakes in Proposal One.
Troy W. Santora,
37, has served on the board of directors
of Wind River since April 2009, as President of Wind River since
August 2009 and was Wind Rivers Senior Vice President from
March 2009 through August 2009. From March 2005 through March
2009, Mr. Santora held positions of increasing
responsibility with United America Insurance Group and most
recently served as Vice President
Reinsurance & Risk Management. From July 2003 through
March 2005, Mr. Santora was a Reinsurance Analyst with
Reliance Insurance Company. From December 2002 through July
2003, Mr. Santora was Assistant Vice President of Garnet
Captive Services, LLC. From July 2002 through December 2002,
Mr. Santora was Co-Founder and Principal of Coastline
Capital Solutions. From April 2000 through July 2002,
Mr. Santora held various positions with Commonwealth Risk.
From May 1996 through 2000, Mr. Santora held various
positions with Reliance Insurance Company. He received his
Bachelor of Business & Administration from Temple
Universitys Fox School of Business.
Set forth below is biographical information concerning the
person nominated for election as alternate director of Wind
River Insurance Company, Ltd.
Janita Burke,
34, has served as an alternate director to
Alan Bossin to the board of directors of Wind River since
October 2003 and as a partner at the law firm of Appleby Hunter
Bailhache where she has been employed since 1999. Prior to
joining Appleby Hunter Bailhache, Ms. Burke was a pupil
from 1998 through
12
1999 at Bermuda Government Attorney Generals
Chambers in Hamilton, Bermuda. Ms. Burke received a LLB
(Honors) Degree from the University of Warwick.
Proposal 3(B)
Appointment of Independent Auditor
The board of directors of Wind River has appointed
PricewaterhouseCoopers, Hamilton, Bermuda, as the independent
auditor of Wind River for the fiscal year ending
December 31, 2009. At the Annual General Meeting,
shareholders will be asked to ratify this appointment.
Representatives of the firm are not expected to be present at
the meeting.
Other
Matters
In addition to the matters set forth above for which we are
soliciting your proxy, we expect that the financial statements
of Wind River for the year ended December 31, 2008,
together with the report of the independent auditors in respect
of these financial statements, will be presented for approval at
the annual general meeting of Wind River in accordance with
Bermuda law. We will refer this matter to our shareholders
present in person and entitled to vote at the Annual General
Meeting.
We are not asking you for a proxy with respect to
this matter and you are requested not to send us a proxy with
respect to this matter.
We know of no other specific matter to be brought before the
annual general meeting of Wind River that is not referred to in
this Proxy Statement. If any other matter properly comes before
the annual general meeting of Wind River, our corporate
representative or proxy will vote in accordance with his or her
judgment on such matter.
Required
Vote
Our Board of Directors will cause our corporate representative
or proxy to vote the shares in Wind River in the same proportion
as the votes received at the Annual General Meeting from our
shareholders on the above proposals.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES FOR DIRECTOR AND ALTERNATE DIRECTOR OF WIND
RIVER, AND THE APPOINTMENT OF PRICEWATERHOUSECOOPERS AS THE
INDEPENDENT AUDITOR OF WIND RIVER FOR 2009.
13
PROPOSAL FOUR:
APPROVAL OF THE PAYMENT OF FEES TO FOX PAINE &
COMPANY, LLC IN CONNECTION WITH OUR RIGHTS OFFERING
General
Earlier this year, we conducted a rights offering, which we
refer to as the Rights Offering, to raise
approximately $100 million of capital. In connection with
the Rights Offering, we entered into an agreement, which we
refer to as the Backstop Agreement, with Fox
Paine & Company and an investment entity controlled by
Fox Paine & Company, which we refer to as the
Backstop Purchaser, pursuant to which the Backstop
Purchaser agreed, subject to certain conditions, to purchase all
of the Class A common shares and Class B common shares
offered in the Rights Offering and not subscribed for pursuant
to the Rights Offering. A copy of the Backstop Agreement has
been filed as an exhibit to our Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
March 17, 2009.
We entered into the Backstop Agreement to ensure that, subject
to the conditions of the Backstop Agreement, all Class A
common shares and Class B common shares offered in the
Rights Offering were either distributed in the Rights Offering
or purchased subsequent to the Rights Offering at the same
purchase price at which the rights were exercisable. This
arrangement gave us a high degree of certainty that we would
raise gross proceeds of $100 million through the Rights
Offering.
In the Backstop Agreement and subject to the successful
completion of the Rights Offering, we agreed to pay Fox
Paine & Company an arrangement fee of $2,000,000 and a
backstop fee equal to 5% of (i) the aggregate number of
shares issuable upon the exercise of the rights distributed to
our shareholders multiplied by (ii) the subscription price
per share, or $5,007,391, for total payments of $7,007,391. We
refer to the arrangement fee and the backstop fee collectively
as the Backstop Fees.
Because Fox Paine & Company is a related party and all
other shareholders were not offered the Backstop Fees in the
public Rights Offering, the payment of the Backstop Fees is
subject to the prior approval of our shareholders pursuant to
the NASDAQ Stock Market rules and you are being asked to approve
the payment of the Backstop Fees. In the Backstop Agreement, we
agreed that we would at our next general meeting after the
Rights Offering submit for shareholder approval the payment of
the Backstop Fees and use our reasonable efforts to solicit
proxies from our shareholders to vote in favor of payment of the
Backstop Fees. Fox Paine & Company and its affiliates
will not vote any of the Class A common shares or
Class B common shares that they purchased pursuant to the
Backstop Agreement for purposes of this proposal.
Our Audit Committee, which is composed solely of independent
directors within the meaning of Rule 5602(a)(2) of the
rules of The NASDAQ Stock Market, determined that the Backstop
Fees were consistent with similar fees paid in connection with
similar financing transactions and were fair and in our best
interests and those of our shareholders and recommended that our
Board of Directors approve the Backstop Fees. All of our
directors, other than Messrs. Fox and Gersch who did not
vote on the matter, approved the Backstop Agreement and the
payment of the Backstop Fees and voted to recommend approval of
the Backstop Fees to our shareholders. In reaching this
conclusion, our Audit Committee considered and discussed among
itself and with its financial advisors various factors,
including market precedents, alternative transaction structures,
the terms of the Backstop Agreement and the benefits of a
backstopped transaction over a less certain best
efforts undertaking from an underwriter, along with
UAIs interest in moving ahead with speed and certainty in
raising capital. Taking those factors into account, the Audit
Committee determined that entering into the Backstop Agreement
was in the best interests of us and our shareholders.
Required
Vote
Approval of the payment of the Backstop Fees requires the
affirmative vote of a majority of the votes cast by the
shareholders entitled to vote and present in person or by proxy
at the Annual General Meeting. Fox Paine & Company and
its affiliates will not vote any of the Class A common
shares or Class B common shares that they purchased
pursuant to the Backstop Agreement for purposes of this
proposal. The abstention by Fox Paine & Company and
its affiliates with respect to shares purchased pursuant to the
Backstop Agreement will not have the effect of a vote against
Proposal Four with respect to these shares.
OUR BOARD
OF DIRECTORS RECOMMENDS
VOTING FOR APPROVAL OF THE PAYMENT OF THE
BACKSTOP FEES.
14
ADDITIONAL
INFORMATION
Executive
Officers
Set forth below is certain biographical information with respect
to the executive officers of UAI who do not also serve on our
Board of Directors. In this Proxy Statement, the term
United National Insurance Companies includes the
insurance and related operations conducted by United National
Insurance Company, an indirect wholly-owned subsidiary of UAI
(UNIC) and its subsidiaries, including American
Insurance Adjustment Agency, Inc., Diamond State Insurance
Company, J.H. Ferguson and Associates, LLC, International
Underwriters, LLC, United National Casualty Insurance Company,
and United National Specialty Insurance Company. The term
Penn-America
Group includes the insurance and related operations
conducted by
Penn-America
Insurance Company, Penn-Star Insurance Company and Penn-Patriot
Insurance Company. The term United America Insurance
Group refers to the insurance and related operations
conducted by the United National Insurance Companies and
Penn-America
Group.
The biography for Mr. Frakes, our President and Chief
Executive Officer, is set forth above under the caption
Nominees for Director in Proposal One. The
biography for Mr. Santora, President of Wind River Reinsurance
Company, Ltd., is set forth above under the caption
Proposal 3(A)-Election of Directors and Alternate
Director in Proposal Three.
Thomas M. McGeehan,
52, has served as our Interim Chief
Financial Officer since May 2008, and was previously our Vice
President and Corporate Controller. From 1985 through 2001,
Mr. McGeehan held various positions with Colonial Penn
Insurance Company and ultimately served as Assistant Vice
President Finance/Marketing & Accounting.
Mr. McGeehan received a Bachelors of Business
Administration from Temple University in 1981, a Masters in
Business Administration from LaSalle University in 1988 and a
Masters in Taxation from Villanova University in 1995.
David Myers,
59, has served as President of Diamond State
Group since November 2007. From January 2001 until December
2006, Mr. Myers served as Senior Vice President of Everest
National Insurance Company. Prior thereto, Mr. Myers was
employed with CIGNA, a property and casualty insurance company,
for 27 years in positions of increasing responsibility and
most recently Vice President Custom Accounts,
Commercial Insurance Services. Mr. Myers received his
Bachelor of Science in Business Administration from Alfred
University in 1972.
J. Scott Reynolds,
45, has served as UNICs
President since July 2008. From 2006 through July 2008,
Mr. Reynolds served as President of the Specialty
Underwriting Division of AmWINS Group, Inc. From 2002 through
2006, Mr. Reynolds served as Chief Actuary for AmWINs.
Prior to his time at AmWINS, Mr. Reynolds was a Manager at
Royal & Sun Alliance responsible for all commercial
lines pricing, filings and statistical reporting.
Mr. Reynolds began his career in 1987 at Royal &
Sun Alliance within its actuarial department and later served as
Division Actuary of Liberty Mutuals Business Markets
Division. Mr. Reynolds received his Bachelors of
Science in Statistics from Appalachian State University in 1987
and is an Associate of the Casualty Actuarial Society.
Matthew Scott,
49, has served as President of
Penn-America
Group since June 2009. From April 2008 through June 2009,
Mr. Scott was the Senior Vice President of Casualty
Brokerage of Diamond State Group. From October 2007 through
April 2008, Mr. Scott was Vice President of Business
Development of Diamond State Group. Previously, Mr. Scott
served as an executive in the Strategic Markets Unit of White
Mountains subsidiary, OneBeacon Insurance Company.
Mr. Scott began his career in 1986 at Sigel Insurance
Group, where he was ultimately appointed Vice President, Sales.
In 1998, Mr. Scott joined CGU Insurance Company as Vice
President, Specialty Business Development. CGU Insurance Company
was acquired by White Mountains Insurance Group in 2001.
Mr. Scott previously served on the Board of American
Centennial Insurance Company, a White Mountains company. He
received his Bachelor of Arts from Franklin & Marshall
College and his Master of Science in Insurance Management from
Boston University.
15
Compensation
Committee Report
The Compensation Committee has reviewed the following
Compensation Discussion and Analysis with our management, and
has recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee Fiscal Year 2008
Stephen A. Cozen, Chairperson
Saul A. Fox
Michael J. Marchio
Compensation
Discussion and Analysis
Introduction
The Compensation Discussion and Analysis focuses on the
compensation of the executive officers listed in the Summary
Compensation Table that follows (the named
officers). The named officers for 2008 were
Larry A. Frakes, President and Chief Executive
Officer, United America Indemnity, Ltd.;
Thomas M. McGeehan, Interim Chief Financial Officer,
United America Indemnity, Ltd.; Kevin L. Tate, former Chief
Financial Officer, United America Indemnity, Ltd.; Raymond H.
(Scott) McDowell, former President,
Penn-America
Group; J. Scott Reynolds, President, United National Group;
David R. Whiting, former President and Chief Executive Officer
of Wind River; and, Richard S. March, former Senior Vice
President and General Counsel, United America Insurance Group.
The following is a discussion of our objectives and philosophies
regarding executive officer and director compensation, as well
as the actions taken in 2008 and the compensation paid to
executive officers and directors with respect to 2008.
Our
Compensation Philosophy
Our primary goals in structuring compensation opportunities for
our executive officers and directors are: (i) fostering
achievement of corporate performance objectives;
(ii) recognizing participants contributions to
corporate success; and (iii) attracting and retaining
quality professionals. We apply a consistent compensation
philosophy for all executive officers and directors. This
philosophy is based on the premise that our achievements result
from the coordinated efforts of all employees, including our
executive officers and our directors, working toward our
business objectives. The Compensation Committee designed and
refines the executive compensation program to support the
overall objective of maximizing long-term shareholder value by
aligning the interests of executives with the interests of
shareholders and by rewarding executives for achieving corporate
and individual objectives.
Generally, we structure our executives total compensation
packages to be within the range of compensation paid by peer
companies to their executives. We consider our peer companies to
be those who are similarly-sized, operating in the insurance
industry and emphasizing long-term incentive compensation in
structuring their own executives compensation packages. We
believe that such competitor comparison provides a suitable
balance between the competitive nature of our business, the
attendant need to recruit and retain talented executives, and
the Compensation Committees strong desire to ensure our
executives do not receive compensation in excess of their peers
or their contribution to our long-term success and shareholder
value. We believe, however, that our emphasis on performance and
shareholder return with a long-term perspective may result in
compensation opportunities which differentiate our practices
from those of our peers. In short, our executives will be well
compensated if, and only if, they create value for our
shareholders over a period of several years.
We use three primary components of executive compensation to
satisfy our compensation objectives: base salary,
performance-based annual cash bonus incentives through our
Amended and Restated Annual Incentive
16
Awards Program, and long-term incentive opportunities through
options and awards of restricted shares pursuant to our Share
Incentive Plan. Our policies with respect to these components
are discussed below.
Base
Salary
The Compensation Committee uses base salary to compensate
executives at salary levels comparable to the levels used by
other companies within our peer group. Individual salaries set
within a competitive range are also based upon an evaluation of
other factors such as individual past performance, potential
with us, level and scope of responsibility, and internal equity.
Base salaries are reviewed annually by the Compensation
Committee to determine if such salaries continue to fall within
a competitive range relative to our peer group. Base salaries
for each of the executive officers named in the Summary
Compensation Table were set initially in the officers
employment agreements with us and have been increased in
subsequent years in connection with merit increases, which
relate to individual past performance and enhanced professional
responsibilities.
Annual
Cash Bonus Incentives
Our annual cash bonus opportunities are generally designed to
motivate executives to focus on the performance of the division,
subsidiary, or unit for which they have primary responsibility.
Annual cash bonuses are paid through our Amended and Restated
Annual Incentive Awards Program, pursuant to which the
Compensation Committee and the Section 162(m) Committee
establish the criteria and objectives that must be met during
the applicable performance period in order to earn an annual
bonus. The criteria relate to certain objective performance
goals, such as net income, operating income and underwriting
income as well as individual performance expectations. Operating
income is a non-GAAP financial measure used by management as a
measure of performance. It is calculated as net income less
after-tax net realized investment gains (losses), less after-tax
gain and one-time charges from discontinued operations, less any
after-tax extraordinary gains or losses. Operating income is not
a substitute for net income determined in accordance with GAAP,
and investors should not place undue reliance on this measure.
Underwriting income is a non-GAAP financial measure used by
management as a measure of profitability. It is calculated as
net premiums earned less net losses and loss adjustment
expenses, less acquisition costs and other underwriting
expenses. The amount of the annual bonuses payable to our Chief
Executive Officer, Chief Financial Officer and the three most
highly compensated officers (other than the CEO) (collectively,
the named executive officers) are dependent, in
large measure, on our performance with respect to performance
targets, and the extent to which actual performance exceeds or
falls short of target performance directly results in a
corresponding increase or decrease in the bonus payable.
With respect to 2008, the annual cash bonus opportunities
related to our net income targets with respect to Larry A.
Frakes, our President and Chief Executive Officer, accident year
targets
and/or
other
target performance measures with respect to Raymond H. McDowell
and J. Scott Reynolds, underwriting income with respect to
Thomas M. McGeehan, our Interim Chief Financial Officer, and
David R. Whiting, the former President and Chief Executive
Officer of Wind River Mr. Whiting was also eligible for a
cash bonus on the basis of individual achievement of certain
qualitative goals. Messrs. Tate and March were not eligible
for bonuses for 2008 performance due to their departures from
the Company. These targets reflect each executives
responsibilities and a
day-to-day
emphasis on generating profits.
The Compensation Committee believes that the targets which are
set each year are challenging, but within reach of a talented
executive team. The Compensation Committee is also empowered to
exercise negative discretion and reduce the bonuses otherwise
payable to any of our employees in the event that the
Compensation Committee determines that particular corporate
results were achieved without significant personal contributions
by the particular employee. We may also clawback bonuses in
accordance with the Sarbanes-Oxley Act of 2002 in the event that
our financials are restated.
Long-term
Incentives
Because short-term results do not, by themselves, accurately
reflect the performance of a company in our industry or the
return realized by our shareholders, our executive officers are
also eligible to receive equity
17
awards under the terms of our Share Incentive Plan. Grants under
the Share Incentive Plan are an important component of our
compensation policies and are designed to motivate recipients to
act from the perspective of a long-term owner. We also believe
that providing executive officers with equity ownership:
(i) serves to align the interests of executive officers
with shareholders by creating a direct link between compensation
and shareholder return; (ii) creates a significant,
long-term interest in our success; and (iii) aids in the
retention of key executive officers in a competitive market for
executive talent.
The Compensation Committee approves all grants of equity
compensation to our executive officers and employees as it deems
appropriate to achieve the goals set forth above and establishes
the time or times at which grants of restricted shares will be
awarded under our Share Incentive Plan. To promote our goals of
attracting and retaining talented executives, equity grants
usually vest over certain periods of time subject to continued
employment in good standing (or are subject to transferability
restrictions), which vesting is contingent in certain instances
on attainment of performance goals. Grants that are made upon an
executives commencement of employment are also often
contingent on the executives purchase of restricted shares
so that, from day one, the executive is a shareholder with a
significant personal stake in UAI
With respect to stock options, the Compensation Committee sets
the exercise price of an aggregate grant of options at the
closing price of our shares on the date of grant. In accordance
with an amendment to our Share Incentive Plan, which was
approved by shareholders at an Extraordinary General Meeting
held on January 28, 2008, stock options may be repriced
without shareholder approval. Neither material nonpublic
information nor the pending release of such information is
generally considered when selecting grant dates or when
convening a meeting of the Compensation Committee.
Equity
Ownership Generally
We have adopted certain policies with respect to equity
compensation, all of which apply to our executive officers and
directors, such as policies regarding insider trading which
prohibit trading during periods immediately preceding the
release of material non-public information. We also permit
officers to establish so-called
Rule 10b5-1
trading plans, subject to the prior approval of our in-house
Legal Department.
We expect our executive officers to maintain a significant
personal stake in our company. While we have not established
stock ownership guidelines that are applicable to every
executive, we may consider adopting such guidelines in 2009.
Individual guidelines were established in connection with the
employment agreements for Messrs. Frakes and Reynolds.
Other
Benefits
Our executive officers are entitled to participate in the
various benefits made available to our employees generally,
including retirement plans, group health plans, paid vacation
and sick leave, basic life insurance and short-term and
long-term disability benefits. Furthermore, all of our directors
and officers and the directors and officers of our subsidiaries
are covered by our directors and officers liability insurance.
Directors
Compensation
The form and amount of director compensation is determined by
the Board of Directors based on recommendations by our
Nominating and Governance committee. We believe that director
compensation should not only be competitive, but also fair and
reasonable in light of our directors background and
experiences, as well as the overall time, effort, and complexity
involved in carrying out their responsibilities as directors. In
determining the form and amount of consideration to be paid to
our non-employee directors, we strive to ensure that director
compensation does not exceed customary levels by critically
evaluating the amount and form of consideration that we directly
or indirectly pay to each director and to organizations with
which a director is affiliated, so as not to jeopardize any
directors independence. In order to align the objectives
of our directors and our shareholders, as well as to retain
directors for an extended period, our directors receive annual
retainers and meeting fees entirely in cash, in a combination of
cash and restricted shares, or entirely in restricted shares at
the election of the director. In addition, the director receives
a cash payment (a
gross-up)
for the payment of the percentage of all applicable federal and
state withholdings that
18
corresponds with his election to receive 100% of his
compensation in restricted shares. None of our directors has
elected to receive payment entirely in the form of cash. The
shares are not transferable unless and until (1) a change
in control of UAI, (2) a director passes away, or
(3) the one-year anniversary after a directors
service on our Board of Directors ceases, so as to ensure that
our directors maintain a long-term perspective when overseeing
our operations. Amounts earned by our directors are set forth in
Proposal One.
Employment
Agreements
We have entered into employment agreements with most of our
executive officers, as described in more detail below following
the Summary Compensation Table. These agreements are important
to the future of our business because our success depends, in
part, upon the individual employees who represent us in dealings
with our producers and the investment community, execute our
business strategy, and identify and pursue strategic
opportunities and initiatives. We believe that such agreements
are helpful in providing our executives with some comfort
regarding their duties and compensation in exchange for
necessary restrictive covenants with respect to competitive
activity, non-solicitation, and confidentiality during and
following the officers employment with us. These covenants
are particularly important in protecting our interests in what
is an intensely competitive industry and in which leveraging the
personal relationships of our executives is critical to our
success. The employment agreements also dictate the level and
extent to which the officers receive post-termination
compensation.
Severance
and Change in Control Policy
We have established severance consistent with the market
practices of our peer companies. The Compensation Committee and
the Board of Directors approve appropriate severance policies
for each executive officer designed to (i) compensate an
executive who is involuntarily separated from us for reasons
other than for cause and (ii) compensate the
executive to the extent the executive is subject to a
post-termination non-compete agreement.
With respect to change in control policies, we have adopted a
limited change in control policy designed to incentivize our
executive officers to pursue transactions which benefit our
shareholders. Specifically, Messrs. Frakes, McGeehan and
Reynolds are entitled to accelerated vesting of their options in
the event that we undergo a change in control while they are
employed.
Committee
Activities and Compensation Paid to Named Officers and Directors
with respect to 2008
The Compensation Committee and the Section 162(m) Committee
met several times in 2008 and took a variety of actions relating
to the hiring, retention, 2008 compensation and separation of
our executives. Actions of the Compensation Committee and the
Section 162(m) Committee included: approving an amended and
restated employment agreement with our Chief Executive Officer;
approving increases in the base salaries of certain named
officers; setting targets and thereafter reviewing and approving
incentive compensation with respect to 2008; approving equity
incentive plans for our named officers; approving employment
agreements and compensation packages for new named officers;
approving the form of employment and restrictive covenant
agreements to be used for named officers and other officers
throughout the organization; approving the delegation of
specified authorities to out Chief Executive Officer within
narrowly defined parameters; and, approving separation
agreements and consulting agreements in connection with the
departure of certain named officers. More detail on these
activities is set forth below.
Increases
in Base Salary for Certain Named Executive
Officers
At the beginning of 2008 the Compensation Committee approved
increases in base salary for Messrs. March, McGeehan and
Tate based on an increase in the cost of living. The
Compensation Committee also felt that the previous performance
and hard work of these officers merited the increase in base
salaries.
19
Equity
Compensation Opportunities
In 2006, we took significant steps towards moving to a system of
smaller but more frequent awards of equity compensation under
our Share Incentive Plan to our executive officers. We continued
with this approach in 2008. Many of our senior executives,
including Messrs. March and Tate, had last received
significant equity grants in connection with the acquisition of
our predecessor (and the executives simultaneous purchase
of significant amounts of restricted shares), and vesting in the
remaining portion of these grants is tied to continued
employment.
Our senior executives were given the opportunity to participate
in two equity compensation plans with respect to 2008
performance. First, Messrs. March, McGeehan and Tate are,
while employed and in good standing, eligible for an equity
award based upon the achievement of targets with respect to
underwriting income of our U.S. operations. Because we
derive the majority of our income from our U.S. operations,
we felt it was appropriate to tie these awards to achievement of
what we felt were challenging income targets. Additionally, this
award would not be made until after the 2011 accident year. We
feel that giving time for 2008 accident year results to develop
best reflects the nature by which we realize profits and losses
and provides a powerful retention incentive for our senior
executives. See Note 14 of the notes to the consolidated
financial statements in Item 8 of Part II of our
Annual Report on
Form 10-K
for the year ended December 31, 2008 for additional
details. Based on our 2008 performance, Messrs. March,
McGeehan and Tate did not receive awards of restricted shares
relative to this equity compensation opportunity.
The second opportunity was made available to Messrs. March,
McGeehan and Tate. It is dependent on achievement of certain
targets relative to our return on equity. We feel that this
target measures the efficiency and extent to which we employ our
assets in a manner that produces sustainable long-term growth.
The three-year vesting period associated with awards of
restricted shares pursuant to this opportunity provides an
incentive to recipients to remain with us following an award
grant. Based on our 2008 return on equity program and our 2008
performance, Messrs. March, McGeehan and Tate did not
receive awards of restricted shares.
Mr. McDowell was also given the opportunity to obtain an
equity award with respect to 2008 performance. While
Mr. McDowell was employed and in good standing, he was
eligible to receive a bonus of a targeted amount of which the
first one-third was payable in restricted shares that would vest
over a four-year period. Targets were set for Mr. McDowell
that were tied to specified targets for
Penn-America
and included gross written premium, combined ratio and
underwriting income. In addition, Mr. McDowell also had
strategic targets established for
Penn-America.
Based on 2008 performance, Mr. McDowell did not receive an
award of restricted shares.
Appointment
of Thomas M. McGeehan as Interim Chief Financial
Officer
In May 2008, Mr. McGeehan was appointed as Interim Chief
Financial Officer following the resignation of Mr. Tate.
Richard
S. March Employment Termination
The employment of Richard S. March, the former Senior Vice
President and General Counsel of United America Insurance
Group, ended effective December 31, 2008.
Perquisites
The material perquisites provided to our executives are
relatively limited.
As shown below in the Summary Compensation Table,
Mr. Whiting received housing and transportation allowances.
Such allowances are customary in Bermuda as methods of
recruiting executives due to the scarcity of local talent. The
Compensation Committee considered the cost of such allowances
when reviewing and approving both Mr. Whitings base
salary and his overall compensation package.
20
Review
of Equity Granting Policies
Our Audit Committee has conducted a review of our equity
compensation policies and practices and reported the results of
its review to our Board of Directors. We have since concluded
that there were no outstanding issues relating to any option
backdating and that past practices with respect to
option grants were appropriate.
Recent
Activities
On August 14, 2009, we and Larry Frakes entered into an
amendment to his Amended and Restated Employment Agreement. The
amendment modified the exercise price and vesting schedules of
his 498,838 options to acquire Class A common shares. The
purpose of the amendment was to continue to incentivize
Mr. Frakes. In exchange for modifying the strike price of
his options, the vesting period was extended.
Other
Material Considerations
Post-Employment
Benefits
The post-employment benefits available to our executive officers
are subject to the terms of the officers employment
agreement. These benefits are meant to provide the officers with
protection in the event that they are forced to seek other
employment by virtue of a without cause or
good reason termination, and provide consideration
for their restrictive covenants. Our executive officers are not
provided with a supplemental retirement benefit plan or other
pension beyond that of our normal 401(k) plan and the matching
contributions therein.
Our non-employee directors are not provided with any
post-service benefits. The only material effect of a change in
control of UAI on our non-employee directors compensation
would be a lifting of the transferability restrictions on their
restricted shares if they do not remain directors.
Impact of
Accounting, Tax and Legal Considerations
With respect to taxes, Section 162(m) of the Internal
Revenue Code imposes a $1 million limit on the deduction
that we may claim in any tax year with respect to compensation
paid to the Chief Executive Officer, Chief Financial Officer and
certain other named executive officers. Accordingly, the
Compensation Committee and the Section 162(m) Committee
monitor which executive officers qualify as the so-called
named executive officers so that steps may be taken
to ensure that compensation paid to these officers is deductible
under Section 162(m).
Certain types of performance-based compensation are exempted
from the $1 million limit. Performance-based compensation
can include income from stock options, performance-based
restricted stock, and certain formula driven compensation that
meets the requirements of Section 162(m). The Compensation
Committee and the Section 162(m) Committee seek to
structure performance-based and equity compensation for our
named executive officers in a manner that complies with
Section 162(m) in order to provide for the deductibility of
such compensation. All compensation paid to our executive
officers with respect to 2008 was deductible for purposes of
Section 162(m).
Compensation is also affected by Section 409A of the
Internal Revenue Code. Section 409A dictates the manner by
which deferred compensation opportunities are offered to our
employees and requires, among other things, that
nonqualified deferred compensation be structured in
a manner that limits employees abilities to accelerate or
further defer certain kinds of deferred compensation. We operate
our existing deferred compensation arrangements in accordance
with Section 409A.
We also take into account Sections 280G and 4999 of the
Internal Revenue Code when structuring compensation. These two
sections relate to the imposition of excise taxes on executives
who receive, and the loss of deductibility for employers who
pay, excess parachute payments made in connection
with a change in control. Because these taxes dampen the
incentives we provide to our executives to pursue a beneficial
21
transaction for our shareholders, we often structure our
compensation opportunities in a manner that reduces the impact
of Sections 280G and 4999.
Conclusion
Based on our review and analysis, we believe that each element
of compensation and the total compensation provided to each of
our named executive officers and directors is reasonable and
appropriate. The value of the compensation payable to our
executives and directors is heavily dependent on our performance
and the investment return realized by our shareholders.
Furthermore, we believe our executives and directors
total compensation opportunities are comparable to our
competitors executives and directors
opportunities. We believe these compensation opportunities allow
us to attract and retain talented executives and directors who
have helped and who will continue to help us grow as we look to
the years ahead.
Executive
Compensation
Summary
Compensation Table
The following table shows information concerning the
compensation recorded by UAI for the 2006, 2007, and 2008 fiscal
years paid to principal executive officers, principal financial
officer, and other named executive officers.
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Name and
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Principal Position
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Year
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Salary
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Bonus
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Awards(1)
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Awards(2)
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Compensation(3)
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Earnings
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Compensation
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Total
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|
|
Larry A. Frakes,
|
|
|
2008
|
|
|
$
|
600,000
|
|
|
|
|
|
|
$
|
52,625
|
|
|
$
|
1,126,556
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
774
|
(5)
|
|
$
|
1,779,955
|
|
President and Chief
|
|
|
2007
|
(4)
|
|
|
373,846
|
|
|
|
|
|
|
|
70,172
|
|
|
|
497,316
|
|
|
|
643,836
|
|
|
|
|
|
|
|
|
|
|
|
1,585,170
|
|
Executive Officer, UAI
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas M. McGeehan,
|
|
|
2008
|
(6)
|
|
$
|
230,699
|
|
|
|
150,000
|
(7)
|
|
$
|
69,319
|
|
|
$
|
9,668
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,110
|
(8)
|
|
$
|
471,796
|
|
Interim Chief Financial
|
|
|
2007
|
|
|
|
222,856
|
|
|
|
|
|
|
|
65,887
|
|
|
|
13,746
|
|
|
|
95,300
|
|
|
|
|
|
|
|
12,167
|
|
|
|
409,956
|
|
Officer, UAI
|
|
|
2006
|
|
|
|
212,483
|
|
|
|
|
|
|
|
14,505
|
|
|
|
20,058
|
|
|
|
129,000
|
|
|
|
|
|
|
|
10,969
|
|
|
|
387,015
|
|
Kevin L. Tate,
|
|
|
2008
|
(9)
|
|
$
|
141,983
|
|
|
|
|
|
|
$
|
(74,986
|
)
|
|
$
|
(165,088
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,080
|
(10)
|
|
$
|
(90,011
|
)
|
Former Chief Financial
|
|
|
2007
|
|
|
|
320,039
|
|
|
|
|
|
|
|
92,626
|
|
|
|
110,984
|
|
|
|
129,200
|
|
|
|
|
|
|
|
13,500
|
|
|
|
666,349
|
|
Officer, UAI
|
|
|
2006
|
|
|
|
314,400
|
|
|
|
|
|
|
|
18,582
|
|
|
|
176,740
|
|
|
|
187,200
|
|
|
|
|
|
|
|
13,450
|
|
|
|
710,372
|
|
J. Scott Reynolds,
|
|
|
2008
|
(11)
|
|
$
|
141,346
|
|
|
|
251,920
|
|
|
$
|
148,524
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,658
|
(12)
|
|
$
|
545,448
|
|
President, United National
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Whiting,
|
|
|
2008
|
|
|
$
|
425,000
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
166,074
|
(13)
|
|
$
|
591,074
|
|
Former President and
|
|
|
2007
|
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,000
|
|
|
|
|
|
|
|
164,014
|
|
|
|
759,014
|
|
CEO, Wind
|
|
|
2006
|
(14)
|
|
|
318,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,313
|
|
|
|
|
|
|
|
114,332
|
|
|
|
608,395
|
|
River Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company, Ltd.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond H. (Scott) McDowell,
|
|
|
2008
|
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
109,350
|
|
|
$
|
32,650
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,452
|
(15)
|
|
$
|
446,452
|
|
Former President
,
|
|
|
2007
|
(16)
|
|
|
91,154
|
|
|
|
400,000
|
|
|
|
35,352
|
|
|
|
10,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
537,061
|
|
Penn-America
Group
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. March,
|
|
|
2008
|
(17)
|
|
$
|
380,769
|
|
|
|
|
|
|
$
|
6,267
|
|
|
$
|
69,325
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,086
|
(18)
|
|
$
|
472,447
|
|
Former General Counsel,
|
|
|
2007
|
|
|
|
369,208
|
|
|
|
|
|
|
|
106,835
|
|
|
|
110,984
|
|
|
|
149,040
|
|
|
|
|
|
|
|
13,500
|
|
|
|
749,567
|
|
United America
|
|
|
2006
|
|
|
|
362,444
|
|
|
|
|
|
|
|
21,435
|
|
|
|
176,740
|
|
|
|
216,000
|
|
|
|
|
|
|
|
13,422
|
|
|
|
790,041
|
|
Insurance Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amounts listed represent the dollar amount recognized for
financial statement reporting purposes in the 2008 fiscal year
for the fair value of restricted stock granted in 2008 and prior
fiscal years for the named executive officers in accordance with
SFAS 123R. See Note 14 of our consolidated financial
statements contained in our Annual Report on
Form 10-K
for the year ended December 31, 2008 regarding assumptions
underlying valuation of equity awards. Negative dollar amounts
may be generated due to the forfeiture of stock due to the
departure of a named executive.
|
|
(2)
|
|
The amounts listed represent the dollar amount recognized for
financial statement reporting purposes in the 2008 fiscal year
for the fair value of stock options granted in 2008 and prior
fiscal years for the named executive officers in accordance with
SFAS 123R. The amount recognized in 2008 excludes any
|
22
|
|
|
|
|
estimate of forfeiture related to service based vesting.
Negative dollar amounts may be generated due to the forfeiture
of stock options due to the departure of a named executive.
|
|
(3)
|
|
Non-Equity Incentive Plan Compensation is earned with respect to
the year indicated, but paid to the recipient in the following
fiscal year.
|
|
(4)
|
|
Mr. Frakes employment with us commenced May 10,
2007.
|
|
(5)
|
|
For 2008, includes premium paid for life insurance benefits.
|
|
(6)
|
|
Mr. McGeehan was appointed as our Interim Chief Financial
Officer effective May 15, 2008. Prior to that time, he was
not a named executive officer of the Company.
|
|
(7)
|
|
The bonus was granted in recognition of 2008 performance but is
not payable until 2010 and is contingent on
Mr. McGeehans continued employment.
|
|
(8)
|
|
2006 and 2007 amounts represent matching contributions under our
401(k) Plan. For 2008, includes a matching contribution under
our 401(k) plan in the amount of $11,696 and $414 paid for life
insurance benefits.
|
|
(9)
|
|
Mr. Tate resigned effective May 15, 2008.
|
|
(10)
|
|
For 2006, includes a matching contribution under our 401(k) plan
in the amount of $13,450. For 2007, represents a matching
contribution under our 401(k) plan in the amount of $15,499 less
the recoupment of $1,999 relative to excess contribution by the
Company. For 2008, includes a matching contribution under our
401(k) plan in the amount of $7,905 and $175 premium paid for
life insurance benefits.
|
|
(11)
|
|
Mr. Reynolds employment with UNIC commenced effective
July 28, 2008.
|
|
(12)
|
|
For 2008, includes a matching contribution under our 401(k) plan
in the amount of $3,589 and $69 premium paid for life insurance
benefits.
|
|
(13)
|
|
For 2006, includes the following payments to and contributions
for Mr. Whiting: $90,000 payment of housing and travel
allowance, $10,625 additional matching contribution to Bermuda
pension plans, $8,286 payment of employees portion of
Bermuda employment tax, $4,402 payment of employees
portion of health and related expenses, and $1,019 payment of
employees portion of Bermuda social insurance
contributions. For 2007, includes the following payments to and
contributions for Mr. Whiting: $120,000 payment of housing
and travel allowance, $21,250 additional matching contribution
to Bermuda pension plans, $15,145 payment of employees
portion of Bermuda employment tax, $6,190 payment of
employees portion of health and related expenses, and
$1,429 payment of employees portion of Bermuda social
insurance contributions. For 2008, includes the following
payments to and contributions for Mr. Whiting: $120,000
payment of housing and travel allowance, $21,250 additional
matching contribution to Bermuda pension plans, $16,511 payment
of employees portion of Bermuda employment tax, $6,782
payment of employees portion of health and related
expenses, and $1,531 payment of employees portion of
Bermuda social insurance contributions.
|
|
(14)
|
|
Mr. Whitings employment by Wind River commenced
effective April 1, 2006 and ended effective March 31,
2009.
|
|
(15)
|
|
For 2008, includes a matching contribution under our 401(k) plan
in the amount of $4,038 and $414 premium paid for life insurance
benefits.
|
|
(16)
|
|
Mr. McDowells employment with
Penn-America
Group commenced effective September 4, 2007 and ended
effective June 8, 2009 upon his resignation.
|
|
(17)
|
|
Mr. March ceased being a named executive officer in April
2008 and was employed through December 31, 2008.
|
|
(18)
|
|
For 2006, includes a matching contribution under our 401(k) plan
in the amount of $13,422. For 2007, represents a matching
contribution under our 401(k) plan in the amount of $13,500. For
2008, includes a matching contribution under our 401(k) plan in
the amount of $13,800 and $2,286 premium paid for life insurance
benefits.
|
23
Grants
of Plan-Based Awards During 2008
The following table shows information concerning grants of
plan-based awards made by UAI in 2008 to its principal executive
officers, principal financial officer, and other named executive
officers. These awards were grants under our Share Incentive
Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Date Fair
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
Number
|
|
|
Number
|
|
|
or Base
|
|
|
Value of
|
|
|
|
|
|
|
Under Non-Equity
|
|
|
Under Equity
|
|
|
of Shares of
|
|
|
of Securities
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
Grant
|
|
|
Incentive Plan Awards
|
|
|
Incentive Plan Awards
|
|
|
Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
Name
|
|
Date
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
|
Larry A. Frakes(1)
|
|
|
2/5/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,419
|
|
|
$
|
20.05
|
|
|
$
|
2,188,653
|
|
|
|
|
2/5/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,419
|
|
|
|
20.05
|
|
|
|
2,923,352
|
|
Thomas M. McGeehan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin L. Tate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Reynolds(2)
|
|
|
7/28/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
1,399,000
|
|
David R. Whiting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond H. (Scott) McDowell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. March
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
As described in a
Form 8-K
filed by us on February 8, 2008, the options were granted
upon the cancellation of the previous options which included a
grant of (a) 197,473 time vesting options with an exercise
price of $25.32 and (b) 197,473 performance vesting options
with an exercise price of $25.32 per share. The time-based
options vest at 25% on each December 31 of 2008 through 2011.
The performance-based options generally vest at the same rate
based on our achievement of various financial performance goals.
|
|
(2)
|
|
Represents restricted stock awarded to Mr. Reynolds as part
of his employment agreement. The award was granted at the
closing share price of $13.99 on July 28, 2008 and vests
10% on July 28, 2008, 22.5% on July 28, 2009, 22.5% on
July 28, 2010, 22.5% on July 28, 2011 and 22.5% on
July 28, 2012.
|
Employment
Agreements
Larry
A. Frakes
Mr. Frakes has an employment agreement with UAI, which was
amended and restated effective as of February 5, 2008 and
further amended on August 14, 2009. The initial term of the
agreement is from May 10, 2007 through December 31,
2011, subject to an automatic renewal on a year to year basis in
the absence of notice by either party to terminate the
agreement. Under the agreement, Mr. Frakes is to receive an
annual base salary of $600,000. Mr. Frakes was eligible to
receive an annual bonus for the 2008 calendar year equal to
$1,500,000 with one-third payable in restricted stock vesting
over four years and two-thirds payable in cash. In respect of
each full calendar year during the term, commencing with 2008,
we will provide Mr. Frakes with an annual bonus opportunity
based upon the achievement of certain consolidated net income
targets as approved by the Compensation and Section 162(m)
Committees. Such awards, if achieved, are to be paid in both
cash and restricted shares. The first $500,000 shall be payable
in restricted shares, and with respect to calendar year
2008-2010,
shall vest at the rate of 25% per year over four years.
Thereafter, any restricted shares awarded shall vest at the rate
of
33
1
/
3
%
per year over three years. Any annual bonus amount earned in
excess of the first $500,000 shall be paid in cash, with 50% of
such amount paid within 30 days of the approval of such
bonus by our Board of Directors. The remaining 50% shall be
retained for three years. After such three-year period, the
performance score for the original bonus year shall be
redetermined and any retained amounts, after being increased or
reduced, shall then be paid to Mr. Frakes, along with a
deemed investment return thereon. Receipt of the retained cash
amounts and vesting in restricted shares are both subject to
certain continued employment requirements. Subject to continued
employment, Mr. Frakes shall also be entitled to a cash
payment to cover the federal and state tax liability associated
with the vesting of such restricted stock.
24
Under the agreement, Mr. Frakes purchased 50,000 of our
Class A common shares at an aggregate purchase price of
over $1,000,000. These shares are not transferable except in
limited instances. Mr. Frakes also received 394,496 options
to acquire our Class A common shares, with an exercise
price equal to $25.32. These options were canceled and 498,838
options to acquire our Class A common shares, with an
exercise price equal to $20.05 were granted effective
February 5, 2008. 50% of such options were time vesting
options and vested at the rate of 25% per year over four years.
The remaining 50% were performance vesting options and vested at
the rate of up to 25% per year over four years, subject to
achievement of certain performance targets by Mr. Frakes.
The exercise price and vesting schedule of these options was
modified effective August 14, 2009 so that Mr. Frakes
now has 498,838 options to acquire our Class A common
shares with an exercise price of $11.90. 50% of such options are
time vesting options and shall vest at the rate of 25% on each
of December 31, 2008, December 31, 2010,
December 31, 2011 and December 31, 2012. The remaining
50% continue to be performance vesting options and shall vest at
a rate of 25% on each of December 31, 2008,
December 31, 2010, December 31, 2011 and
December 31, 2012. All provisionally vested performance
vesting options shall conclusively vest as of the 120th day
following a two-year consecutive period of either calendar 2010
and 2011 or 2011 and 2012, if our annual return on equity and
annual increase in gross written premiums exceeded the results
achieved by more than 50% of a group of our publicly-traded
peers. The intent of the cancellation of the prior options and
the grant of new options in February 2008 was to align the
strike price of the options with the average price of the shares
purchased by Mr. Frakes. The purpose of the recent
amendment to his employment agreement was to continue to
incentivize Mr. Frakes. In exchange for modifying the
strike price of his options, the vesting period was extended as
described above. All options, including unvested and
provisionally vested options, shall vest conclusively upon a
change in control of UAI, if it is determined that the price of
our shares grew at or in excess of a 15% compounded annual rate
during the period beginning as of the effective date of the
employment agreement and ending as of the date of the change in
control. Option vesting is subject to certain continued
employment requirements.
Mr. Frakess employment may be terminated at any time
by our Board of Directors or by Mr. Frakes upon three
months written notice. If a termination is for cause
(as such term is defined in the employment agreement), death or
disability, Mr. Frakes shall be entitled to receive all
accrued but unpaid base salary, and any vesting of restricted
stock
and/or
options shall cease. If Mr. Frakess employment is
terminated without cause or for good reason (as such
term is defined in the employment agreement), Mr. Frakes
shall receive severance payments equal to his monthly base
salary multiplied by months served, which is capped at eighteen
(18) months, (less any amounts paid during the applicable
notice period), continued benefits for 18 months, and
continued vesting in awarded restricted stock and provisionally
vested performance vesting options. For 18 months following
Mr. Frakess termination for any reason,
Mr. Frakes shall be subject to certain non-compete,
non-solicit and confidentiality obligations.
Thomas
M. McGeehan
Mr. McGeehan does not have an executive employment
agreement with the Company nor with any of its subsidiaries.
Kevin
L. Tate
Prior to Mr. Tates resignation, Mr. Tate had an
executive employment agreement with UNIC. The agreement provided
for an initial employment term through December 31, 2008,
with additional one-year renewal terms unless either party gives
90 days prior written notice of non-renewal to the
other. If UNIC elected not to renew the agreement at the end of
the initial term, and Mr. Tate had otherwise performed
satisfactorily, he would receive, conditioned upon execution of
a general release and compliance with post-termination
obligations, monthly payments of base salary until the earlier
of six months following the date of termination or the
commencement of full-time employment with another employer.
With respect to the annual cash compensation, the agreement
provided that Mr. Tate was entitled to an annual direct
salary of not less than $312,000, which was subject to review on
an annual basis. Mr. Tate was also eligible for an annual
bonus, conditioned on the achievement of performance targets
included in our Amended and Restated Annual Incentive Awards
Program.
25
Under the agreement, UNIC could have also terminated
Mr. Tate for cause or if he became
disabled (as such terms are defined in the
agreement) or upon his death, in which case
(1) Mr. Tate would not have been entitled to any
separation payments in the case of a termination for cause or
death, and (2) in the case of disability, Mr. Tate
would have been entitled to six months of base salary payable
monthly (subject to reduction for disability payments otherwise
received by Mr. Tate), and conditioned upon the execution
by Mr. Tate of a general release and compliance with
post-termination obligations.
If UNIC terminated Mr. Tate without cause or he
resigned as a result of the relocation of the principal
executive offices of UNIC or the business relocation of
Mr. Tate (in both cases without UNIC offering Mr. Tate
a reasonable relocation package), UNIC had agreed to severance
pay of 18 months, payable monthly, and subject to the
execution of a general release and further adjustment for the
equity compensation package granted to such executive.
During this severance period, UNIC would have also been
obligated to maintain any medical, health, and accident plan or
arrangement in which Mr. Tate participated until the
earlier of the end of the severance period or Mr. Tate
becoming eligible for coverage by another employer and subject
to Mr. Tate continuing to bear his share of coverage costs.
The agreement also imposed non-compete, non-solicitation, and
confidentiality obligations on Mr. Tate upon his
termination for any reason. The agreement provided that for a
period of 18 months following the termination of employment
for any reason (but in the case of termination for cause, only
after a determination by our Board of Directors of such
substantial failure to perform), Mr. Tate shall not engage
directly or indirectly, whether as owner, manager, operator, or
otherwise, in any property and casualty insurance or reinsurance
company that writes more than 15% of its written premium by
issuing commercial insurance policies for businesses through a
network of wholesale or managing general agents on a binding
authority basis. The agreement also contained non-solicitation
provisions that prohibit Mr. Tate, for a period of
18 months following termination of employment, from doing
business with any employee, officer, director, agent,
consultant, or independent contractor employed by or performing
services for UNIC, or engaging in insurance-related business
with any party who is or was a customer of UNIC during
Mr. Tates employment (or during such
18-month
period), or a business prospect of UNIC during
Mr. Tates employment. The agreement also provided
that Mr. Tate may elect to forego separation payments and
certain equity awards and in return no longer be subject to
certain provisions of the non-competition restrictions (such as
those prohibiting engaging in the specialty and casualty
insurance business or any business engaging in the insurance
agency or brokerage business), but still remain subject to the
other non-compete provisions, confidentiality provisions, and
non-solicitation provisions of the agreement. If Mr. Tate
violated his restrictive covenants or confidentiality
obligations, the employment agreement also permitted UNIC to
recover gain realized by Mr. Tate upon the exercise of
options or sale of shares during a designated period, to
purchase his shares at the lesser of cost or fair market value
and for the forfeiture of any unexercised options.
Mr. Tate has been granted various options to purchase our
Class A common shares. The first set of options granted on
September 5, 2003 had an exercise price of $10 per share
and initially provided for vesting over time in 20% increments
over a five-year period, with any unvested options forfeitable
upon termination of Mr. Tates employment for any
reason (including cause). Mr. Tate was granted 39,375 of
these options. Effective December 31, 2005, the vesting
schedule was amended so that 20% vested as of December 31,
2004, 40% vested as of December 31, 2005, 52% vested as of
December 31, 2006, 64% vested as of December 31, 2007
and 100% would have vested as of December 31, 2008. As
Mr. Tate resigned prior to the vesting of the final
tranche, the remaining 36% were forfeited. The second set of
options were performance-vesting options granted on
September 5, 2003, having an exercise price of $10 per
share and initially provided vesting in 25% increments over a
four-year period and conditioned upon our achieving various
operating targets. Mr. Tate was granted 65,625 of these
options. Effective December 31, 2005, the terms of these
performance-vesting options were amended in order to eliminate
the performance criteria. The performance hurdle with respect to
accelerated option vesting upon a change in control was also
eliminated. As a result, the options vest and become exercisable
in accordance with the following timetable, without regard to
performance criteria: 0% vested as of December 31, 2004,
50% vested as of December 31, 2005, 60% vested as of
December 31, 2006, 70% vested as of December 31, 2007
and 100% would have vested as of December 31, 2008. As
Mr. Tate
26
resigned prior to the vesting of the final tranche, the
remaining 30% were forfeited. All of the unvested options would
have vested upon a change in control in our company.
Mr. Tate had 90 days from his resignation date to
exercise vested options.
J. Scott
Reynolds
Mr. Reynolds has an executive employment agreement with
UNIC. The agreement provides for an initial employment term
through December 31, 2011, with additional one-year renewal
terms unless either party gives 120 days prior
written notice of non-renewal to the other. If UNIC and
Mr. Reynolds do not reach agreement on a new, written
agreement at the expiration of the term, Mr. Reynolds shall
be an employee at will and none of the provisions of the
agreement shall apply except for certain restrictive covenants.
With respect to the annual cash compensation, the agreement
provides that Mr. Reynolds is entitled to an annual direct
salary of not less than $350,000, which is subject to review on
an annual basis. Commencing with the 2008 accident year,
Mr. Reynolds is also eligible for an annual bonus,
conditioned on the achievement of performance targets included
in our Amended and Restated Annual Incentive Awards Program.
One-third of each annual bonus is payable in restricted
Class A common shares and two-thirds is payable in cash. If
Mr. Reynolds remains an employee in good standing through
the expiration of the initial term, he may upon notice elect to
accelerate the vesting of any then unvested restricted shares
previously granted.
Under the agreement, UNIC may terminate Mr. Reynolds for
cause or if he becomes disabled (as such
terms are defined in the agreement) or upon his death, in which
case (1) Mr. Reynolds would not be entitled to any
separation payments in the case of a termination for cause or
death, and (2) in the case of disability, Mr. Reynolds
would be entitled to six months of base salary payable monthly
(subject to reduction for disability payments otherwise received
by Mr. Reynolds), and conditioned upon the execution by
Mr. Reynolds of a general release and compliance with
post-termination obligations.
If UNIC terminates Mr. Reynolds without cause
or he resigns as a result of the relocation of the principal
executive offices of UNIC or the business relocation of
Mr. Reynolds (in both cases without UNIC offering
Mr. Reynolds a reasonable relocation package), UNIC has
agreed to severance pay of 12 months, payable monthly, and
subject to the execution of a general release and further
adjustment for the equity compensation package granted to
Mr. Reynolds.
During this severance period, UNIC is also obligated to maintain
any medical, health, and accident plan or arrangement in which
Mr. Reynolds participates until the earlier of the end of
the severance period or Mr. Reynolds becoming eligible for
coverage by another employer and subject to Mr. Reynolds
continuing to bear his share of coverage costs.
The agreement also imposes non-compete, non-solicitation, and
confidentiality obligations on Mr. Reynolds upon his
termination for any reason. The agreement provides that for a
period of 12 months following the termination of employment
for any reason (but in the case of termination for cause, only
after a determination by our Board of Directors of such
substantial failure to perform), Mr. Reynolds shall not
engage directly or indirectly, whether as owner, manager,
operator, or otherwise, in any insurance related business
competitive with the business of UNIC or its affiliates. The
agreement also contains non-solicitation provisions that
prohibit Mr. Reynolds, for a period of 12 months
following termination of employment, from doing business with
any employee, officer, director, agent, consultant, or
independent contractor employed by or performing services for
UNIC, or engaging in insurance-related business with any party
who is or was a customer of UNIC during Mr. Reynoldss
employment (or during such
12-month
period), or a business prospect of UNIC during
Mr. Reynoldss employment.
David
R. Whiting
Prior to Mr. Whitings separation, Mr. Whiting
had an employment agreement with Wind River effective as of
April 1, 2006 (the Effective Date), pursuant to
which Mr. Whiting agreed to serve as President and Chief
Executive Officer of Wind River. The agreement between
Mr. Whiting and the Company provided for an initial
employment term of three years from the Effective Date, with
additional one-year renewal terms,
27
unless either party gave written notice to the other at least
ninety days prior to the expiration of the then current term.
Mr. Whiting received a base salary of $425,000 subject to
adjustment (base salary) and was eligible for an
annual cash bonus. For calendar year 2008, Mr. Whiting was
eligible for a cash bonus in an amount no less than forty
percent of his base salary based upon Wind River achieving
certain income targets. During the employment term,
Mr. Whiting was also entitled to a housing allowance of
$9,000 per month and a transportation and travel allowance of
$1,000 per month.
The agreement also imposed certain non-compete,
non-solicitation, no-hire and confidentiality obligations on
Mr. Whiting following the termination of his employment for
any reason.
Pursuant to the agreement, Wind River could have terminated
Mr. Whiting for cause (as such term is defined
it the agreement), upon his permanent disability (as
such term is defined in the agreement) or upon his death.
Mr. Whiting could have terminated his employment with or
without good reason (as such term is defined in the
agreement) following forty-five days written notice to
Wind River. If Mr. Whitings employment was terminated
by Wind River because of death or permanent disability or for
cause, by Mr. Whiting without good reason or if the term
expired, Wind River would have had to pay to Mr. Whiting
his full base salary plus housing, transportation and travel
allowances through the date of termination at the rate in effect
at the time of termination and Wind River would have had no
further obligations to Mr. Whiting under the agreement. If
Mr. Whitings employment was terminated by Wind River
without cause or by Mr. Whiting for good reason, then Wind
River would have paid, subject to his execution of a general
release and his compliance with certain post-termination
obligations, to Mr. Whiting an amount equal to
Mr. Whitings then monthly base salary plus housing
and transportation and travel allowances multiplied by six, with
such amount payable in equal monthly installments, and shall
maintain any medical or
health-and-accident
plan in effect for such time. During the twelve month period
following Mr. Whitings employment, Mr. Whiting
agreed to be available to Wind River from time to time to assist
on matters he worked on during his employment at Wind River or
its affiliates.
Wind River also agreed to indemnify Mr. Whiting for all
taxes levied, assessed or applied on the income or assets of
Mr. Whiting by any governmental authority other than the
Government of Bermuda, resulting from his employment activities
at the direction of Wind River.
Raymond
H. (Scott) McDowell
Prior to Mr. McDowells resignation, Mr. McDowell
had an executive employment agreement with
Penn-America
Insurance Company, or PAIC, an indirect wholly-owned
subsidiary of UAI. The agreement provided for an initial
employment term through December 31, 2011, with additional
one-year renewal terms unless either party gave
120 days prior written notice of non-renewal to the
other. If PAIC and Mr. McDowell did not reach agreement on
a new, written agreement at the expiration of the term,
Mr. McDowell would have been an employee at will and none
of the provisions of the agreement would have applied except for
certain restrictive covenants.
With respect to the annual cash compensation, Mr. McDowell
was entitled to an annual direct salary of not less than
$300,000, which was subject to review on an annual basis.
Commencing with the 2008 accident year, Mr. McDowell was
also eligible for an annual bonus, conditioned on the
achievement of performance targets included in our Amended and
Restated Annual Incentive Awards Program. One-third of each
annual bonus was payable in our restricted Class A common
shares and two-thirds was payable in cash. If Mr. McDowell
would have remained an employee in good standing through the
expiration of the initial term, he could have elected upon
notice to accelerate the vesting of any then unvested restricted
shares previously granted.
Under the agreement, PAIC could have terminated
Mr. McDowell for cause or if he became
disabled (as such terms are defined in the
agreement) or upon his death, in which case
(1) Mr. McDowell would not have been entitled to any
separation payments in the case of a termination for cause or
death, and (2) in the case of disability, Mr. McDowell
would have been entitled to six months of base salary payable
monthly (subject to reduction for disability payments otherwise
received by Mr. McDowell), and conditioned upon the
execution by Mr. McDowell of a general release and
compliance with post-termination obligations.
28
If PAIC terminated Mr. McDowell without cause
or he resigned as a result of the relocation of the principal
executive offices of PAIC or the business relocation of
Mr. McDowell (in both cases without PAIC offering
Mr. McDowell a reasonable relocation package), PAIC had
agreed to severance pay of 12 months, payable monthly, and
subject to the execution of a general release and further
adjustment for the equity compensation package granted to
Mr. McDowell.
During this severance period, PAIC would have also been
obligated to maintain any medical, health, and accident plan or
arrangement in which Mr. McDowell participated until the
earlier of the end of the severance period or Mr. McDowell
becoming eligible for coverage by another employer and subject
to Mr. McDowell continuing to bear his share of coverage
costs.
The agreement also imposed non-compete, non-solicitation, and
confidentiality obligations on Mr. McDowell upon his
termination for any reason. The agreement provided that for a
period of 12 months following the termination of employment
for any reason (but in the case of termination for cause, only
after a determination by our Board of Directors of substantial
failure to perform), Mr. McDowell would not engage directly
or indirectly, whether as owner, manager, operator, or
otherwise, in any insurance related business competitive with
the business of PAIC or its affiliates. The agreement also
contained non-solicitation provisions that prohibit
Mr. McDowell, for a period of 12 months following
termination of employment, from doing business with any
employee, officer, director, agent, consultant, or independent
contractor employed by or performing services for PAIC, or
engaging in insurance-related business with any party who is or
was a customer of PAIC during Mr. McDowells
employment (or during such
12-month
period), or a business prospect of PAIC during
Mr. McDowells employment.
On September 4, 2007, Mr. McDowell was granted 20,000
options to purchase our Class A common shares with an
exercise price of $21.87 per share vesting over time in 25%
increments over a four-year period, with any unvested options
forfeitable upon termination of Mr. McDowells
employment for any reason (including cause). All of the unvested
options would have become vested upon a change in control of
UAI. At the time of Mr. McDowells resignation, he had
vested in 25% of the options and the remaining 75% were
forfeited. Mr. McDowell has 90 days from his
separation date to exercise vested options.
Richard
S. March
Prior to Mr. Marchs separation, Mr. March had an
executive employment agreement with UNIC. The agreement provided
for an initial employment term through December 31, 2008,
with additional one-year renewal terms unless either party gave
90 days prior written notice of non-renewal to the
other. If UNIC elected not to renew the agreement at the end of
the initial term, and Mr. March had otherwise performed
satisfactorily, Mr. March would receive, conditioned upon
execution of a general release and compliance with
post-termination obligations, monthly payments of base salary
until the earlier of six months following the date of
termination or the commencement of full-time employment with
another employer.
With respect to the annual cash compensation, the agreement
provided that Mr. March was entitled to an annual direct
salary of not less than $320,000, which was subject to review on
an annual basis. Mr. March was also eligible for an annual
bonus, conditioned on the achievement of performance targets
included in our Amended and Restated Annual Incentive Awards
Program.
Under the agreement, UNIC could have terminated Mr. March
for cause or if Mr. March became
disabled (as such terms are defined in the
agreement) or upon his death, in which case
(1) Mr. March would not have been entitled to any
separation payments in the case of a termination for cause or
death, and (2) in the case of disability, Mr. March
would have been entitled to six months of base salary payable
monthly (subject to reduction for disability payments otherwise
received by Mr. March), and conditioned upon the execution
by Mr. March of a general release and compliance with
post-termination obligations.
If UNIC terminated Mr. March without cause or
he resigned as a result of the relocation of the principal
executive offices of UNIC or the business relocation of
Mr. March (in each case without UNIC offering
Mr. March a reasonable relocation package), UNIC had agreed
to severance pay of 18 months,
29
payable monthly, and subject to the execution of a general
release and further adjustment for the equity compensation
package granted to Mr. March.
During this severance period, UNIC would have been obligated to
maintain any medical, health, and accident plan or arrangement
in which Mr. March participated until the earlier of the
end of the severance period or Mr. March becoming eligible
for coverage by another employer and subject to Mr. March
continuing to bear his share of coverage costs.
The agreement also imposed non-compete, non-solicitation, and
confidentiality obligations on Mr. March upon his
termination for any reason. The agreement provided that for a
period of 18 months following the termination of employment
for any reason (but in the case of termination for cause, only
after a determination by UNICs Board of Directors of
substantial failure to perform), Mr. March shall not engage
directly or indirectly, whether as owner, manager, operator, or
otherwise, property and casualty insurance or reinsurance
company that writes more than 15% of its written premium by
issuing commercial insurance policies for businesses through a
network of wholesale or managing general agents on a binding
authority basis. The agreement also contained non-solicitation
provisions that prohibit Mr. March, for a period of
18 months following termination of employment, from doing
business with any employee, officer, director, agent,
consultant, or independent contractor employed by or performing
services for UNIC, or engaging in insurance-related business
with any party who is or was a customer of UNIC during
Mr. Marchs employment (or during such
18-month
period), or a business prospect of UNIC during
Mr. Marchs employment. The agreement also provided
that Mr. March may elect to forego separation payments and
certain equity awards and in return no longer be subject to
certain provisions of the non-competition restrictions (such as
those prohibiting engaging in the specialty and casualty
insurance business or any business engaging in the insurance
agency or brokerage business), but still remain subject to the
other non-compete provisions, confidentiality provisions, and
non-solicitation provisions of the agreement. If Mr. March
violates his restrictive covenants or confidentiality
obligations, the employment agreement also permits UNIC to
recover gain realized by Mr. March upon the exercise of
options or sale of shares during a designated period, to
purchase his shares at the lesser of cost or fair market value
and for the forfeiture of any unexercised options.
Mr. March has been granted various options to purchase our
Class A common shares. The first set of options granted on
September 5, 2003 has an exercise price of $6.50 per share
and are fully vested. Mr. March was granted 56,074 options
from this set of options. The second set of options granted on
September 5, 2003 have an exercise price of $10 per share
and initially provided for vesting over time in 20% increments
over a five-year period, with any unvested options forfeitable
upon termination of Mr. Marchs employment for any
reason (including cause). Mr. March was granted 39,375 of
these options. Effective December 31, 2005, the vesting
schedule was amended so that 20% vested as of December 31,
2004, 40% vested as of December 31, 2005, 52% vested as of
December 31, 2006, 64% vested as of December 31, 2007
and 100% vested as of December 31, 2008. The third set of
options are performance-vesting options granted on
September 5, 2003, having an exercise price of $10 per
share and initially provided vesting in 25% increments over a
four-year period and conditioned upon our achieving various
operating targets. Mr. March was granted 65,625 of these
options. Effective December 31, 2005, the terms of these
performance-vesting options were amended in order to eliminate
the performance criteria. The performance hurdle with respect to
accelerated option vesting upon a change in control was also
eliminated. As a result, the options would have vested and
become exercisable in accordance with the following timetable,
without regard to performance criteria: 0% vested as of
December 31, 2004, 50% vested as of December 31, 2005,
60% vested as of December 31, 2006, 70% vested as of
December 31, 2007 and 100% vested as of December 31,
2008. All of the unvested options would have become vested upon
a change of control in UAI. Mr. March has 150 days
from his separation date to exercise vested options.
30
Outstanding
Equity Awards at December 31, 2008
The following table shows information concerning outstanding
equity awards at December 31, 2008 made by UAI to its
principal executive officers, principal financial officer and
other named executive officers.
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Option Awards
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Stock Awards
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Equity
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Incentive
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Equity
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Plan
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Equity
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Incentive
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Awards:
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Incentive
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Plan
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Market
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Plan
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Awards:
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or Payout
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Awards:
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Market
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Number of
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Value of
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Number of
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Number of
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Number of
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Number of
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Value of
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Unearned
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Unearned
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Securities
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Securities
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Securities
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Shares or
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Shares or
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Shares,
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Shares,
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Underlying
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Underlying
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Underlying
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Units of
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Units of
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Units or
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Units or
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Unexercised
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Unexercised
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Unexercised
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Option
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Stock
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Stock
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Other Rights
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Other Rights
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Options
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Options
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Unearned
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Exercise
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Option
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That Have
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That Have
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That Have
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That Have
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(#)
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(#)
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Options
|
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Price
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Expiration
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Not Vested
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Not Vested
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Not Vested
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Not Vested
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Name
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Exercisable
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Unexercisable
|
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(#)
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($)
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Date
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(#)
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($)
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(#)
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($)
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Larry A. Frakes
|
|
|
62,355
|
|
|
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187,064
|
(1)
|
|
|
|
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$
|
20.05
|
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5/17/17
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|
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$
|
|
|
|
|
|
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$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,419
|
(2)
|
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$
|
20.05
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5/17/17
|
|
|
|
|
|
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|
|
|
|
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|
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|
|
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|
|
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|
|
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16,161
|
(3)
|
|
|
207,022
|
|
|
|
|
|
|
|
|
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Thomas M. McGeehan
|
|
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7,200
|
|
|
|
|
|
|
|
|
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$
|
17.00
|
|
|
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12/16/13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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10,800
|
|
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|
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$
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17.00
|
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12/16/13
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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1,914
|
(4)
|
|
|
24,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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2,940
|
(5)
|
|
|
37,661
|
|
|
|
|
|
|
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|
Kevin L. Tate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
|
|
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|
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J. Scott Reynolds
|
|
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|
|
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|
|
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|
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|
|
|
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|
|
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|
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90,000
|
(6)
|
|
|
1,152,900
|
|
|
|
|
|
|
|
|
|
David R. Whiting
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Raymond H. (Scott) McDowell
|
|
|
5,000
|
|
|
|
15,000
|
(7)
|
|
|
|
|
|
$
|
21.87
|
|
|
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9/4/17
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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10,000
|
(8)
|
|
|
128,100
|
|
|
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Richard S. March
|
|
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56,074
|
|
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|
|
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$
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6.50
|
|
|
|
5/30/09
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
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39,375
|
|
|
|
|
|
|
|
|
|
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$
|
10.00
|
|
|
|
5/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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65,625
|
|
|
|
|
|
|
|
|
|
|
$
|
10.00
|
|
|
|
5/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,602
|
(9)
|
|
|
20,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
1,650
|
(9)
|
|
|
21,137
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Mr. Frakes has 62,355 options that will vest on
December 31, 2009, 62,355 options that will vest on
December 31, 2010 and 62,354 options that will vest on
December 31, 2011.
|
|
(2)
|
|
Mr. Frakes performance vesting options have not
vested.
|
|
(3)
|
|
Mr. Frakes has 4,040 shares that vested on
January 1, 2009, 4,040 shares that will vest on
February 27, 2010, 4,040 shares that will vest on
February 27, 2011 and 4,041 shares that will vest on
February 27, 2012.
|
|
(4)
|
|
Mr. McGeehan has 957 shares that vested on
January 1, 2009 and 957 shares that will vest on
January 1, 2010.
|
|
(5)
|
|
Mr. McGeehan has 1,000 shares that vested on
January 1, 2009, 970 shares that will vest on
January 1, 2010 and 970 shares that will vest on
January 1, 2011.
|
|
(6)
|
|
Mr. Reynolds has 22,500 shares that vested on
July 28, 2009, 22,500 shares that will vest on
July 28, 2010, 22,500 shares that will vest on
July 28, 2011 and 22,500 shares that will vest on
July 28, 2012.
|
|
(7)
|
|
Mr. McDowell has 5,000 options that will vest on
September 4, 2009, 5,000 options that will vest on
September 4, 2010 and 5,000 options that will vest on
September 4, 2011. (8) Mr. McDowell has
5,000 shares that will vest on September 4, 2009 and
5,000 shares that will vest on September 4, 2010.
|
|
(9)
|
|
Mr. Marchs shares vested effective January 1,
2009 pursuant to the terms of his separation agreement.
|
Options
Exercised and Stock Vested in 2008
In 2008, no options were exercised by our principal executive
officers, principal financial officer, and other named executive
officers. Mr. Tate exercised his options following his
resignation and was no longer our principal financial officer at
that time.
31
Pension
Benefits in 2008
None of our named executive officers participate in or have
account balances in qualified or nonqualified defined benefit
plans sponsored by us.
Nonqualified
Deferred Compensation in 2008
None of our named executive officers participate in any
nonqualified defined contribution or other deferred compensation
plans maintained by us.
Potential
Payments Upon Termination or Change in Control
The following is a summary of the agreements and plans that
provide for payment to our current named executive officers at,
following, or in connection with any termination, including
resignation, severance, retirement or constructive termination,
or with a change in control or a change in the named executive
officers responsibilities.
Larry
A. Frakes
Under his employment agreement with us, Mr. Frakess
employment may be terminated at any time by our Board of
Directors or by Mr. Frakes upon three months written notice
with or without cause, upon his death or disability.
|
|
|
|
|
Termination by Us for Cause, Termination by Death or
Disability
. If we terminate
Mr. Frakess employment for cause, death or
disability, Mr. Frakes is entitled to receive all accrued
but unpaid base salary, and any vesting of restricted stock
and/or
options shall cease. For the details of Mr. Frakess
salary, restricted stock, and options, see the description of
Mr. Frakess employment agreement under
Employment Agreements.
|
Under Mr. Frakess employment agreement,
cause means (i) the engaging by Mr. Frakes
in malfeasance, fraud, dishonesty or gross misconduct adverse to
our interests, (ii) the material violation by
Mr. Frakes of certain provisions of his employment
agreement or share/option agreements after notice from us and a
failure to cure such violation within 10 days of the notice
(to the extent the Board of Directors reasonably determines such
violation is curable and subject to notice), (iii) a breach
by Mr. Frakes of any representation or warranty in his
employment agreement or share/option agreements, (iv) the
determination by our Board of Directors that Mr. Frakes has
exhibited incompetence or gross negligence in the performance of
his duties, (v) receipt of a final written directive or
order of any governmental body or entity having jurisdiction
over us requiring termination or removal of Mr. Frakes,
(vi) Mr. Frakes being charged with a felony or other
crime involving moral turpitude, or (vii) Mr. Frakes
substantially failing to perform his duties after notice from us
and failure to cure such non-performance within 10 days of
our notice (to the extent our Board of Directors reasonably
determines such failure to perform is curable and subject to
notice) or violating any of our material policies, including our
corporate governance and ethics guidelines, conflicts of
interest policies and code of conduct applicable to all of our
employees and senior executives.
Under Mr. Frakess employment agreement,
disability occurs when a licensed physician selected
by us determines that Mr. Frakes is disabled and he is
unable to perform or complete his duties for a period of 180
consecutive days or 180 days within any twelve-month period.
|
|
|
|
|
Termination by Us Without Cause or Termination by the
Executive for Good Reason
. If
Mr. Frakess employment is terminated by us without
cause or by Mr. Frakes with good reason, Mr. Frakes is
entitled to receive severance payments equal to his monthly base
salary multiplied by months served (capped at 18) less any
amounts paid during the relevant notice period and any taxes and
withholdings, continued benefits for 18 months, and
continued vesting in awarded restricted stock and provisionally
vested performance vesting options. For details of
Mr. Frakess salary, restricted stock, and options,
see the description of Mr. Frakess employment
agreement under Employment Agreements.
|
32
Under Mr. Frakess employment agreement, good
reason means a willful and substantial reduction in his
material responsibilities and reporting as provided for in the
employment agreement which remains uncured for 30 days
after written notice thereof is provided by Mr. Frakes to
us setting forth in reasonable detail the alleged breach.
Mr. Frakes must provide such written notice within
10 days of the event allegedly giving rise to good reason
or such alleged event shall not provide a basis for such notice.
A modification as to whom Mr. Frakes shall report resulting
from a change of control does not constitute good reason.
|
|
|
|
|
Voluntary Termination
. If
Mr. Frakes voluntarily terminates his employment without
good reason, we will pay him accrued and unpaid base salary
through the termination date (less applicable withholding
taxes). For the details of Mr. Frakess salary, see
the description of Mr. Frakess employment agreement
under Employment Agreements.
|
|
|
|
Change in Control
. Mr. Frakes
received 498,838 options to acquire our Class A common
shares with an exercise price of $20.05. 50% of such options
shall be time vesting options and vest at the rate of 25% per
year over four years. The remaining 50% are performance vesting
options and vest at the rate of up to 25% per year over four
years, subject to achievement of certain performance targets by
Mr. Frakes. Unvested options may also vest upon a change of
control of UAI if it is determined that the price of our shares
appreciated in value by a 15% or greater annual compounded rate
over the period of August 15, 2007 through the date of the
change of control.
|
Assuming Mr. Frakess employment was terminated under
each of these circumstances on December 31, 2008, and
without taking into account any value assigned to
Mr. Frakess covenant not to compete, such payments
and benefits would have had an estimated value of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Time and
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
|
|
|
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary ($)
|
|
|
Based
|
|
|
Restricted Stock
|
|
|
Other ($)
|
|
|
Total ($)
|
|
|
With Cause; Death; Disability; Voluntary Termination(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Without Cause or For Good Reason
|
|
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
1,348
|
(2)
|
|
|
901,348
|
|
Change in Control(3)
|
|
|
|
|
|
|
(4
|
)
|
|
|
207,022
|
|
|
|
|
|
|
|
207,022
|
|
|
|
|
(1)
|
|
We would have no further obligation to Mr. Frakes except to
pay him for all accrued but unpaid base salary through the
termination date.
|
|
(2)
|
|
The present value of medical and dental benefits was used to
calculate this amount.
|
|
(3)
|
|
Assumes continued employment following a change in control. If
Mr. Frakes were to be terminated without cause following a
change in control, Mr. Frakes would be entitled to the
severance set forth above in Without Cause or For Good
Reason and the amount noted under Restricted
Stock in Change in Control.
|
|
(4)
|
|
Although unvested options vest immediately upon a change in
control, as of December 31, 2008, the options were
out of the money. Therefore, no amount would be
recognized.
|
Kevin
L. Tate
Effective May 15, 2008, Mr. Tate resigned as our Chief
Financial Officer. As Mr. Tate voluntarily terminated his
employment, he was entitled to receive his accrued and unpaid
base salary through the termination date (less applicable
withholding taxes). For the details of Mr. Tates
salary, see the description of Mr. Tates employment
agreement under Employment Agreements.
33
J.
Scott Reynolds
Under Mr. Reynoldss employment agreement with UNIC,
UNIC may terminate Mr. Reynoldss employment with or
without cause, or upon his death or disability.
|
|
|
|
|
Termination by UNIC for Cause, Death or
Disability
. If Mr. Reynoldss
employment is terminated because of death, disability,
Mr. Reynoldss resignation (other than as a result of
UNICs failure to offer a reasonable relocation package due
to UNICs relocation) or for cause, Mr. Reynolds would
not be entitled to any separation payments.
|
Under Mr. Reynoldss employment agreement,
cause means (i) Mr. Reynolds substantially
failing to perform his duties after notice from UNIC and failure
to cure such violation within 10 days of the notice (to the
extent our Board of Directors reasonably determines such failure
to perform is curable and subject to notice) or violating any of
our material policies, including our corporate governance and
ethics guidelines, conflicts of interests policies and code of
conduct applicable to all of our employees and senior
executives, (ii) the engaging by Mr. Reynolds in any
malfeasance, fraud, dishonesty or gross misconduct adverse to
our interests, (iii) the material violation by
Mr. Reynolds of certain provisions of his employment
agreement or share/option agreements after notice from UNIC and
a failure to cure such violation within 10 days of the
notice, (iv) a breach by Mr. Reynolds of any
representation or warranty in his employment agreement or
share/option agreements, (v) the determination by
UNICs Board of Directors that Mr. Reynolds has
exhibited incompetence or gross negligence in the performance of
his duties, (vi) receipt of a final written directive or
order of any governmental body or entity having jurisdiction
over us requiring termination or removal of Mr. Reynolds,
or (vii) Mr. Reynolds being charged with a felony or
other crime involving moral turpitude.
Under his employment agreement, disabled means that
Mr. Reynolds is disabled as certified by a licensed
physician selected by us and is unable to perform or complete
his duties for a period of 180 consecutive days or 180 days
within any twelve-month period.
|
|
|
|
|
Termination by UNIC Without Cause or Termination by the
Executive for Good Reason
. If UNIC terminates
Mr. Reynolds without cause or he resigns as a result of the
relocation of UNICs principal executive offices or the
business relocation of Mr. Reynolds (in both cases without
us offering Mr. Reynolds a reasonable relocation package),
Mr. Reynolds is entitled to severance pay of
12 months, payable monthly, and subject to the execution of
a general release and further adjustment for the equity
compensation package granted to him. During this severance
period, we are also obligated to maintain any medical, health,
and accident plan or arrangement in which Mr. Reynolds
participates until the earlier of the end of the severance
period or Mr. Reynolds becoming eligible for coverage by
another employer and subject to Mr. Reynolds continuing to
bear his share of coverage costs.
|
|
|
|
Change in Control
. All of
Mr. Reynoldss unvested options become vested upon a
change in control of UAI. For the details of the
Executives options, see the description of the
Executives employment agreement under Employment
Agreements.
|
Assuming Mr. Reynoldss employment was terminated
under each of these circumstances on December 31, 2008, and
without taking into account any value assigned to
Mr. Reynoldss covenant not to compete, such payments
and benefits would have had an estimated value of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
|
|
|
Time
|
|
|
Performance
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
Salary ($)
|
|
|
Based
|
|
|
Based
|
|
|
Stock
|
|
|
Other ($)
|
|
|
Total ($)
|
|
|
With Cause; Death; Disability; Voluntary Termination(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Without Cause or For Good Reason
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,881
|
(2)
|
|
|
366,881
|
|
Change in Control(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,152,900
|
|
|
|
|
|
|
|
1,152,900
|
|
34
|
|
|
(1)
|
|
We would have no further obligation to Mr. Reynolds except
to pay him for all accrued but unpaid base salary through the
termination date.
|
|
(2)
|
|
The present value of medical and dental benefits was used to
calculate this amount.
|
|
(3)
|
|
Assumes continued employment following a change in control. If
Mr. Reynolds were to be terminated without cause following
a change in control, Mr. Reynolds would be entitled to the
severance set forth above in Without Cause or For Good
Reason and the amount noted under Restricted
Stock in Change in Control.
|
David
R. Whiting
Wind River elected not to renew Mr. Whitings
employment agreement as of March 31, 2009. As
Mr. Whiting had otherwise performed satisfactorily, he
received his full base salary plus housing and transportation
and travel allowances through the date of termination. For the
details of Mr. Whitings salary, see the description
of Mr. Whitings employment agreement under
Employment Agreements.
Raymond
H. (Scott) McDowell
Effective June 8, 2009, Mr. McDowell resigned as
President of
Penn-America
Group. As Mr. McDowell voluntarily terminated his
employment, he was entitled to receive his accrued and unpaid
base salary through the termination date (less applicable
withholding taxes). For the details of Mr. McDowells
salary, see the description of Mr. McDowells
employment agreement under Employment Agreements.
Richard
S. March
UNIC elected not to renew the Mr. Marchs employment
agreement as of December 31, 2008. As Mr. March had
otherwise performed satisfactorily, he will receive, conditioned
upon execution of a general release and compliance with
post-termination obligations, monthly payments of his base
salary until the earlier of six months following the date of
termination or the commencement of full-time employment with
another employer. For the details of Mr. Marchs
salary, see the description of Mr. Marchs employment
agreement under Employment Agreements.
Mr. Marchs employment agreement expired as of
December 31, 2008. Without taking into account any value
assigned to Mr. Marchs covenant not to compete, such
payments and benefits have an estimated value of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
|
|
|
Time
|
|
|
Performance
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
Salary ($)
|
|
|
Based
|
|
|
Based
|
|
|
Stock
|
|
|
Other ($)
|
|
|
Total ($)
|
|
|
Expiration of Employment Agreement
|
|
$
|
186,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,300
|
|
35
Equity
Compensation Plan Information
The following table provides information concerning our equity
compensation plans as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
Number of
|
|
|
|
|
|
Remaining
|
|
|
|
Shares to be
|
|
|
|
|
|
Available
|
|
|
|
Issued Upon
|
|
|
Weighted-Average
|
|
|
for Future
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Issuance
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Under Equity
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Compensation
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
Plans(1)
|
|
|
Equity compensation plans approved by shareholders
|
|
|
888,495
|
|
|
$
|
17.48
|
|
|
|
2,737,262
|
|
Equity compensation plans not approved by shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
888,495
|
|
|
|
17.48
|
|
|
|
2,737,262
|
|
|
|
|
(1)
|
|
Does not include shares reflected in the column entitled
Number of shares to be issued upon exercise of outstanding
options, warrants and rights. In addition, 793,144
restricted shares have been awarded or purchased under our Share
Incentive Plan, of which 161,730 were forfeited and returned to
the Share Incentive Plan. 742,829 shares have been issued
due to the exercise of options.
|
Compensation
Committee Interlocks and Insider Participation
No member of the Compensation Committee is or was during 2008 an
employee or an officer of UAI or its subsidiaries. No executive
officer of UAI served as a director or a member of the
compensation committee of another company, one of whose
executive officers serves as a member of our Board of Directors
or the Compensation Committee.
Code of
Business Conduct and Ethics
On January 26, 2004, our Board of Directors adopted a Code
of Business Conduct and Ethics that applies to all of the
directors, officers, and employees of UAI and its subsidiaries.
Our Board of Directors most recently reviewed and approved the
Code of Business Conduct and Ethics in October 2008. A copy of
our Code of Business Conduct and Ethics is available on our
website at www.uai.ky.
Principal
Shareholders and Security Ownership of Management
The table on the following page sets forth certain information
concerning the beneficial ownership of our common shares as of
July 15, 2009, including the percentage of our total voting
power such shares represent on an actual basis, by:
|
|
|
|
|
each of our executive officers;
|
|
|
|
each of our directors;
|
|
|
|
each holder known to us to hold beneficially more than 5% of any
class of our shares; and
|
|
|
|
all of our executive officers and directors as a group.
|
As of July 15, 2009, the following share capital of United
America Indemnity, Ltd. was issued and outstanding:
|
|
|
|
|
36,376,860 Class A common shares; and
|
|
|
|
24,122,744 Class B common shares, each of which is
convertible at any time at the option of the holder into one
Class A common share.
|
Based on the foregoing, and assuming each Class B common
share is converted into one Class A common share, as of
July 15, 2009, there would have been 60,499,604
Class A common shares issued and outstanding.
36
Except as otherwise set forth in the footnotes to the table,
each beneficial owner has the sole power to vote and dispose of
all shares held by that beneficial owner.
Principal
Shareholders and Security Ownership of Management(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Total
|
|
|
% As-
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Voting
|
|
|
Converted
|
|
Name and Address of
|
|
Common Shares
|
|
|
Common Shares
|
|
|
Power(2)
|
|
|
Ownership(3)
|
|
Beneficial Owner**
|
|
Shares
|
|
|
%
|
|
|
Shares
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
Fox Paine & Company(4)
|
|
|
31,664,596
|
|
|
|
52.3
|
%
|
|
|
24,122,744
|
|
|
|
100
|
%
|
|
|
89.6
|
%
|
|
|
52.3
|
%
|
Bank of America Corp.(5)
|
|
|
2,312,090
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8
|
%
|
Hotchkis & Wiley Capital Management(6)
|
|
|
1,910,062
|
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
%
|
Pzena Investment Management, LLC(7)
|
|
|
1,507,283
|
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.5
|
%
|
Essex Equity Capital Management, LLC(8)
|
|
|
1,175,641
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.9
|
%
|
Corbyn Investment Management Inc.(9)
|
|
|
1,109,972
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8
|
%
|
Saul A. Fox(10)
|
|
|
561,607
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry A. Frakes(11)
|
|
|
177,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Scott Reynolds(12)
|
|
|
127,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seth J. Gersch(13)
|
|
|
73,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chad A. Leat
|
|
|
69,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen A. Cozen
|
|
|
62,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Kroner(14)
|
|
|
35,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Marchio
|
|
|
31,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas M. McGeehan(15)
|
|
|
24,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond H. McDowell(16)
|
|
|
17,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Myers
|
|
|
10,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew B. Scott
|
|
|
10,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard S. March(17)
|
|
|
2,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troy W. Santora
|
|
|
1,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin L. Tate(17)
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Whiting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (consists of
15 persons)(18)
|
|
|
1,208,011
|
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.0
|
%
|
|
|
|
*
|
|
The percentage of shares beneficially owned does not exceed 1%.
|
|
**
|
|
Unless otherwise indicated, the address for each beneficial
owner is
c/o United
America Indemnity, Ltd., Walker House, 87 Mary Street, George
Town, Grand Cayman, KY1-9002, Cayman Islands.
|
|
(1)
|
|
The numbers of shares set forth in these columns are calculated
in accordance with the provisions of
Rule 13d-3
under the Securities Exchange Act of 1934. As a result, these
figures assume the exercise or conversion by each beneficial
owner of all securities that are exercisable or convertible
within 60 days of July 15, 2009. In particular,
Class A common shares that may be acquired by a particular
beneficial owner upon the conversion of Class B common
shares are deemed to be outstanding for the purpose of computing
the percentage of the Class A common shares owned by such
beneficial owner but are not deemed to be outstanding for the
purpose of computing the percentage of the Class A common
shares owned by any other beneficial owner.
|
37
|
|
|
(2)
|
|
The percentages in this column represent the percentage of the
total outstanding voting power of UAI that the particular
beneficial owner holds. The numerator used in this calculation
is the total votes to which each beneficial owner is entitled,
taking into account that each Class B common share has ten
votes, and the denominator is the total number of votes to which
all outstanding shares of UAI are entitled, less the shares the
Company repurchased as part of its share repurchase programs,
again taking into account that each Class B common share
has ten votes.
|
|
(3)
|
|
The percentages in this column represent the percentage of the
total outstanding share capital of UAI that a particular
beneficial owner holds on an as-converted basis, assuming that
each Class B common share is converted into one
Class A common share. As of July 15, 2009, there were
60,499,604 Class A common shares outstanding on an
as-converted basis. The numerator used in this calculation is
the total number of Class A common shares each beneficial
owner holds on an as-converted basis and the denominator, less
the shares the Company repurchased as part of its share
repurchase programs, is the total number of Class A common
shares on an as-converted basis.
|
|
(4)
|
|
The security holders are: U.N. Holdings (Cayman), Ltd.; U. N.
Holdings (Cayman) II, Ltd.; and U.N. Co-Investment Fund I
(Cayman), L.P.; U.N. Co-Investment Fund II (Cayman), L.P.;
U.N. Co-Investment Fund III (Cayman), L.P.; U.N.
Co-Investment Fund IV (Cayman), L.P.; U.N. Co-Investment
Fund V (Cayman), L.P.; U.N. Co-Investment Fund VI
(Cayman), L.P.; U.N. Co-Investment Fund (Cayman) VII, L.P.; U.N.
Co-Investment Fund VIII (Cayman), L.P.; and U.N.
Co-Investment Fund IX (Cayman), L.P. (collectively, the
Co-Investment Funds). A majority of the outstanding
share capital of U.N. Holdings (Cayman), Ltd. and U.N. Holdings
(Cayman) II, Ltd. are held by Fox Paine Capital Fund II
International, L.P. The sole managing general partner of Fox
Paine Capital Fund II International, L.P. is Fox Paine
Capital International Fund GP, L.P. The sole general
partner of Fox Paine Capital International Fund GP, L.P. is
Fox Paine International GP, Ltd. As a result, each of Fox Paine
Capital Fund II International, L.P., Fox Paine Capital
International Fund GP, L.P., and Fox Paine International
GP, Ltd. may be deemed to control U.N. Holdings (Cayman), Ltd.
and U. N. Holdings (Cayman) II, Ltd. The sole general partner of
each of the Co-Investment Funds is Fox Paine Capital
Co-Investors International GP, Ltd., which, together with Fox
Paine Capital International Fund GP, L.P., as its sole
shareholder, and Fox Paine International GP, Ltd., as the sole
general partner of Fox Paine Capital International Fund GP,
L.P., may be deemed to control such funds. In addition, pursuant
to a management agreement with Fox Paine Capital International
GP, Ltd. and Fox Paine Capital Fund II International, L.P.,
Fox Paine & Company, LLC acts as the investment
advisor for certain of the security holders and, consequently,
may be deemed to be the indirect beneficial owner of such
securities. Fox Paine International GP, Ltd., as the general
partner of Fox Paine Capital International Fund GP, L.P.,
may terminate that management agreement at any time in its sole
discretion. Fox Paine International GP, Ltd. disclaims ownership
of any securities that Fox Paine Capital International
Fund GP, L.P. may beneficially own to the extent of any
partnership interests in Fox Paine Capital International
Fund GP, L.P. that persons other than Fox Paine
International GP, Ltd. hold. Fox Paine Capital International
Fund GP, L.P., in turn, disclaims ownership of any
securities that Fox Paine Capital Fund II International,
L.P. and Fox Paine Capital Co-Investors International GP, Ltd.
may beneficially own to the extent of any partnership or share
capital interests in Fox Paine Capital Fund II
International, L.P. and Fox Paine Capital Co-Investors
International GP, Ltd., respectively, that persons other than
Fox Paine Capital International Fund GP, L.P. hold. Fox
Paine Capital Fund II International, L.P. disclaims
ownership of any securities that U.N. Holdings (Cayman), Ltd.
and U. N. Holdings (Cayman) II, Ltd. beneficially owns to the
extent of any share capital interests in U.N. Holdings (Cayman),
Ltd. and U. N. Holdings (Cayman) II, Ltd. that persons other
than Fox Paine Capital Fund II International, L.P. hold.
Fox Paine Capital Co-Investors International GP, Ltd. disclaims
ownership of any securities that the Co-Investment Funds
beneficially own to the extent of any partnership interests in
the Co-Investment Funds that persons other than Fox Paine
Capital Co-Investors International GP, Ltd. hold. Fox
Paine & Company, LLC disclaims ownership of any
securities that it or any of the foregoing security holders may
beneficially own.
|
|
(5)
|
|
Based on information provided pursuant to an amended
Schedule 13G filed on June 10, 2009 with the
Securities and Exchange Commission, which reported that Bank of
America Corporation (Bank of America), a parent
holding company, has shared dispositive power as to
2,312,090 shares, and the power
|
38
|
|
|
|
|
to direct the shared vote of 2,212,602 shares. The joint
ownership of shares and voting power are held by the following
companies: Bank of America Corporation, Bank of America N.A.,
Columbia Management Advisors, LLC, and Merrill Lynch, Pierce,
Fenner & Smith, Inc. Each company listed has its
principal business office at 100 North Tryon Street, Floor 25,
Bank of America Corporate Center, Charlotte, NC 28255.
|
|
(6)
|
|
Based on information provided pursuant to an amended
Schedule 13G filed with the Securities and Exchange
Commission on February 13, 2009, which reported that
Hotchkis and Wiley Capital Management, LLC
(Hotchkis), an investment advisor, has sole
dispositive power as to 1,910,062 shares, has sole
dispositive power as to 951,443 shares and has no shared
voting power over the remaining shares. The amended
Schedule 13G was filed prior to the completion of our
Rights Offering and therefore does not include shares purchased
pursuant to our Rights Offering, if any. The address for
Hotchkis is 725 S. Figueroa Street, 39th Floor, Los
Angeles, California 90017.
|
|
(7)
|
|
Based on information provided pursuant to an amended
Schedule 13G filed on February 17, 2009 with the
Securities and Exchange Commission, which reported that Pzena
Investment Management, LLC (Pzena), an investment
advisor, has sole dispositive power as to 1,507,283 shares,
has the power to direct the vote of 1,171,126 shares and
has no shared voting power over the remaining shares. The
amended Schedule 13G was filed prior to the completion of
our Rights Offering and therefore does not include shares
purchased pursuant to our Rights Offering, if any. The address
for Pzena is 120 West 45th Street, 20th Floor, New York, NY
10036.
|
|
(8)
|
|
Based on information provided pursuant to a Schedule 13G
filed on February 17, 2009 with the Securities and Exchange
Commission, which reported that Essex Equity Capital Management,
LLC (Essex), an investment advisor, has sole
dispositive power and power to direct the vote of
1,175,641 shares. Essex is the investment advisor, manager,
and control person of Essex Equity Strategic Opportunities
Fund A, LLC and Essex Equity Strategic Opportunities
Fund B, LLC. Essex Equity Joint Investment Vehicle, LLC,
the security holder of the securities identified herein, acts
and holds such securities as agent for Essex Equity Strategic
Opportunities Fund A and Essex Equity Strategic
Opportunities Fund B. The Schedule 13G was filed prior
to the completion of our Rights Offering and therefore does not
include shares purchased pursuant to our Rights Offering, if
any. The address for Essex is 95 Morton Street, Ground Floor,
New York, NY 10014.
|
|
(9)
|
|
Based on information provided pursuant to a Schedule 13G
filed on January 20, 2009 with the Securities and Exchange
Commission, which reported that Corbyn Investment Management,
Inc. (Corbyn), a group consisting of an investment
adviser and an investment company, has sole dispositive power
and power to direct the vote of 1,109,972 shares. Of these
shares, an investment company, Greenspring Fund, Inc., has sole
dispositive power and power to direct the vote of
680,461 shares. Corbyn, as the investment adviser, has sole
dispositive power and power to direct the vote of
429,511 shares. The amended Schedule 13G was filed
prior to the completion of our Rights Offering and therefore
does not include shares purchased pursuant to our Rights
Offering, if any. The address for Corbyn is Suite 108,
2330 W. Joppa Road, Lutherville, MD 21093.
|
|
(10)
|
|
Mr. Fox is a director of Fox Paine International GP, Ltd.,
which acts through its board of directors, which includes
Mr. Fox. In addition, Mr. Fox is a member of Fox
Paine & Company, LLC. Mr. Fox disclaims
beneficial ownership of all shares held by U.N. Holdings
(Cayman), Ltd., U. N. Holdings (Cayman) II, Ltd. and each of the
Co-Investment Funds, except to the extent of his indirect
pecuniary interest in such shares.
|
|
(11)
|
|
Includes 62,355 Class A common shares issuable upon
exercise of options that are currently exercisable or will
become exercisable within 60 days.
|
|
(12)
|
|
Does not include 150 Class A common shares purchased in the
name of Mr. Reynolds children and deposited in
custodial accounts for the benefit of the children.
Mr. Reynolds disclaims beneficial ownership of all shares
held in these custodial accounts, except to the extent of his
indirect pecuniary interest in such shares through the
management of his childrens custodial accounts.
|
|
(13)
|
|
Mr. Gersch is a shareholder of Fox Paine International GP,
Ltd., which acts through its board of directors. Mr. Gersch
disclaims beneficial ownership of all shares held by U.N.
Holdings (Cayman), Ltd., U. N.
|
39
|
|
|
|
|
Holdings (Cayman) II, Ltd. and each of the Co-Investment Funds,
except to the extent of his indirect pecuniary interest in such
shares.
|
|
(14)
|
|
Includes 31,806 Class A common shares held by Gray Fox
Capital LLC, of which Mr. Kroner is the President and sole
member and to whom Mr. Kroner has assigned his right to
receive payment for his service as a Director.
|
|
(15)
|
|
Includes 18,000 Class A common shares issuable upon
exercise of options that are currently exercisable or will
become exercisable within 60 days.
|
|
(16)
|
|
Includes 5,000 Class A common shares issuable upon exercise
of options that are currently exercisable or will become
exercisable within 60 days. Based on the most recent
information available to the Company. The employment of
Mr. McDowell terminated effective June 8, 2009.
|
|
(17)
|
|
Based on the most recent information available to the Company.
Messrs. March and Tate are no longer Section 16
Reporting Persons.
|
|
(18)
|
|
Includes 85,355 Class A common shares issuable upon the
exercise of options that are currently exercisable or will
become exercisable within 60 days.
|
Related
Party Transactions
The Audit Committee of our Board of Directors is responsible for
reviewing related party transactions and making recommendations
with respect to related party transactions to our Board of
Directors for its formal approval. If a member of the Audit
Committee or our Board of Directors is a party to the
transaction, he will not vote on the approval of the transaction.
Generally, the transactions reviewed by the Audit Committee are
all transactions with related parties, including those
transactions that are required to be disclosed in our proxy
statement or in the notes to our audited financial statements. A
related party includes any executive officer,
director, nominee for director or beneficial holder of more than
5% of our Class A common shares, any immediate family
member of those persons and any entity that is owned or
controlled by any of the foregoing persons or any entity in
which such a person is an executive officer.
The Charter of our Audit Committee provides that the Audit
Committee shall (a) review and discuss with management all
related party transactions that are relevant to an understanding
of our financial statements, (b) any of our material
financial or non-financial arrangements that do not appear in
our financial statements and (c) make recommendations to
our Board of Directors with respect to related party
transactions. In addition, management prepares a report that is
provided to our Board of Directors at each of their meetings,
which details each related party transaction that was entered
into since the prior meeting and the status of each related
party transaction that is currently active.
Our
Relationship with Fox Paine & Company
As used herein, unless the context requires otherwise, the term
Fox Paine & Company refers to Fox
Paine & Company, LLC and affiliated investment funds.
Shareholders
Agreement
The material terms of the Amended and Restated Shareholders
Agreement dated as of December 15, 2003, as further amended
by Amendment No. 1 to the Amended and Restated Shareholders
Agreement dated as of April 10, 2006, among United National
Group, Ltd. (now United America Indemnity, Ltd.), Fox
Paine & Company and the Ball family trusts (the
Shareholders Agreement), are described below.
Board
Composition
The Shareholders Agreement provides that our Board of Directors
shall be comprised of no fewer than seven directors. Fox
Paine & Company has the right to nominate no fewer
than five of the members of the Board of Directors. Fox
Paine & Company nominated Saul A. Fox, Stephen A.
Cozen, Seth J. Gersch,
40
James R. Kroner and Michael J. Marchio for election as
directors at the 2009 Annual General Meeting pursuant to its
rights under the Shareholders Agreement.
Termination
Certain material terms of the Shareholders Agreement will
terminate when Fox Paine & Company ceases to hold at
least 25% of our fully diluted outstanding common shares. All
terms of the Shareholders Agreement will terminate upon
completion of any transaction that results in Fox
Paine & Company and the Ball family trusts owning in
the aggregate less than a majority of the voting power of the
entity surviving such transaction.
Management
Agreement
On September 5, 2003, as part of the acquisition of Wind
River Investment Corporation, we entered into a management
agreement with Fox Paine & Company and The AMC Group,
L.P., an affiliate of the Ball family trusts (the
Management Agreement). In the Management Agreement,
we agreed to pay to Fox Paine & Company an initial
management fee of $13.2 million for the year beginning on
September 5, 2003, which was paid on September 5,
2003, and thereafter an annual management fee of
$1.2 million subject to certain adjustments. We likewise
agreed to pay to The AMC Group, L.P. an annual management fee of
$0.3 million subject to certain adjustments.
On May 25, 2006, we entered into Amendment No. 1 to
the Management Agreement with Fox Paine & Company and
Wind River Holdings, L.P., formerly The AMC Group, L.P.
(Amendment No. 1). Amendment No. 1
terminates the services provided to us by Wind River Holdings.
L.P. as of May 25, 2006. In connection with our ongoing
operations, we agreed to pay an annual management fee of
$1.5 million to Fox Paine & Company. We believe
this fee represents fair value for the services rendered to us
by Fox Paine & Company. In exchange for the management
fee, Fox Paine & Company continues to assist us and
our affiliates with strategic planning, budgets and financial
projections and assist us and our affiliates in identifying
possible strategic acquisitions and in recruiting qualified
management personnel. Fox Paine & Company also
consults with us and our affiliates on various matters including
tax planning, public relations strategies, economic and industry
trends and executive compensation.
Fox Paine & Company will continue to provide
management services under this agreement until it no longer
holds any equity investment in us or we agree with Fox
Paine & Company to terminate this management
relationship. In connection with the Management Agreement and
Amendment No. 1, we continue to indemnify Fox
Paine & Company and Wind River Holdings, L.P. against
various liabilities that may arise as a result of the management
services they will or have provided us. We also continue to
reimburse Fox Paine & Company for expenses incurred in
providing management services.
In November 2008, management fees of $1.5 million in the
aggregate were paid to Fox Paine & Company pursuant to
the Management Agreement. The management fees cover the period
from September 5, 2008 through September 4, 2009 and
will be recognized ratably over that period.
Investment
with Fox Paine & Company
We are a limited partner in Fox Paine Capital Fund II, L.P.
and Fox Paine Capital Fund II International, L.P.,
investment funds managed by Fox Paine & Company. The
investment pre-dated the September 5, 2003 acquisition of
us by Fox Paine & Company. Our interest in these
partnerships is valued, as of June 30, 2009, at
$4.1 million, and we had a remaining capital commitment to
these partnerships of approximately $3.2 million. This
valuation is based on the most recent financial information we
received from Fox Paine & Company at the time we filed
our Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2009.
Other
Transactions with Fox Paine & Company
In 2008, 2007, and 2006, we directly reimbursed Fox
Paine & Company $0.1 million, $0.3 million,
and $0.2 million, respectively, for expenses incurred in
providing management services. On October 4, 2006, we
41
paid Fox Paine & Company a fee of $0.5 million
for investment banking services provided in connection with the
sale of substantially all of the assets of Penn Independent
Corporation, an indirect wholly-owned subsidiary of UAI.
In connection with our recent successfully completed Rights
Offering, we entered into an agreement with Fox
Paine & Company and an investment entity controlled by
Fox Paine & Company, pursuant to which such investment
entity agreed, subject to certain conditions, to purchase all of
the Class A common shares and Class B common shares
offered in the Rights Offering and not subscribed for pursuant
to the Rights Offering. In such agreement, we agreed to pay Fox
Paine & Company an arrangement fee of $2,000,000 and a
backstop fee equal to 5% of (i) the aggregate number of
shares issuable upon the exercise of the rights distributed to
our shareholders multiplied by (ii) the subscription price
per share, or $5,007,391, for total payments of $7,007,391. See
Proposal Four: Approval of the Payment of Fees to Fox
Paine & Company In Connection With Our Rights
Offering.
Certain
Other Relationships and Related Transactions
In 2008, 2007, and 2006, we paid $1.1 million,
$1.3 million, and $0.2 million, respectively, to Cozen
OConnor for legal services rendered and during the six
months ended June 30, 2009, we paid $0.1 million for
such services. Stephen A. Cozen, the chairman of Cozen
OConnor, is a member of our Board of Directors.
In 2008 and 2007, we paid $0.2 million and
$0.9 million, respectively, in premium to Validus
Reinsurance, Ltd. (Validus). Validus was a
participant on UAIs $100.0 million in excess of
$10.0 million property catastrophe treaty that was entered
into on June 1, 2007. Validus also was a participant on
UAIs $70.0 million in excess of $5.0 million
property catastrophe treaty that was entered into on
June 1, 2006. No losses were ceded by the Company under
these treaties. Validus is also a participant in a quota share
retrocession agreement with Wind River. We estimated that the
following written premium and losses have been assumed by
Validus from Wind River:
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Six Months
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Year Ended
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Year Ended
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Ended June 30,
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December 31,
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December 31,
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2009
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2008
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2007
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(Dollars in thousands)
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Ceded Written Premium
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$
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2,748
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$
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10,634
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$
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10,762
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Ceded Losses
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$
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972
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$
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6,182
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$
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1,893
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Edward J. Noonan, the chairman and chief executive officer of
Validus, was a member of the UAIs Board of Directors until
June 1, 2007, when he resigned. Although Validus is no
longer a related party as a result of Mr. Noonans
resignation, the current quota share retrocession agreement with
Wind River Reinsurance was put in place during the period when
Validus was a related party.
In connection with our recent successfully completed Rights
Offering, we entered into an agreement with Citigroup Global
Markets Inc. (Citi) wherein Citi agreed to be our
exclusive capital markets structuring adviser to provide
advisory and investment banking services and we agreed to pay
$1.0 million in connection with these services. Chad A.
Leat, the managing director and chairman of Citis Global
Alternative Asset Group, is a member of the Companys Board
of Directors and Audit Committee.
42
Audit
Committee Report
The following is the report of our Audit Committee with respect
to our audited financial statements for the fiscal year ended
December 31, 2008.
The Audit Committee operates under a charter adopted by our
Board of Directors on December 15, 2003 and amended on
April 24, 2007. A copy of our Audit Committee Charter is
available on our website at www.uai.ky.
The Audit Committee reviewed and discussed with management our
audited financial statements for the fiscal year ended
December 31, 2008.
The Audit Committee discussed with PricewaterhouseCoopers LLP,
our independent auditor, the matters required to be discussed by
Statement on Auditing Standard No. 61 (Communications with
Audit Committees), as amended by Statement on Auditing Standard
No. 90 (Audit Committee Communications), which include,
among other items, matters related to the conduct of the audit
of our financial statements.
The Audit Committee received written disclosures and the letter
from PricewaterhouseCoopers LLP required by Independence
Standards Board Standard No. 1, which relates to the
auditors independence from United America Indemnity, Ltd.
and its related entities, and has discussed with
PricewaterhouseCoopers LLP their independence from United
America Indemnity, Ltd.
In performing all of these functions, the Audit Committee acts
in an oversight capacity. The Audit Committee relies on the work
and assurances of our management, which has the primary
responsibility for financial statements and reports, and of the
independent auditors who, in their report, express an opinion on
the conformity of our financial statements to United States
generally accepted accounting principles.
Based on the review and discussions referred to above, the Audit
Committee recommended to our Board of Directors that our audited
financial statements be included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 for filing with
the Securities and Exchange Commission.
The Audit Committee
Chad A. Leat, Chairman
James R. Kroner
Michael J. Marchio
Robert S. Fleischer
43
Incorporation
by Reference
The information contained in this Proxy Statement under the
headings Compensation Committee Report, and
Audit Committee Report is not soliciting
material, nor is it filed with the Securities
and Exchange Commission, nor shall the information be
incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that we
specifically incorporate it by reference in a filing.
Shareholder
Proposals
Under the rules and regulations promulgated by the Securities
and Exchange Commission, certain shareholder proposals may be
included in our proxy statement. Any shareholder desiring to
have such a proposal included in our proxy statement for the
annual general meeting to be held in 2010 must deliver a
proposal that complies with
Rule 14a-8
under the Exchange Act to our Chief Executive Officer
c/o United
America Indemnity, Ltd., on or before December 26, 2009.
Where a shareholder does not seek inclusion of a proposal in the
proxy material and submits a proposal outside of the process
described in
Rule 14a-8
of the Exchange Act, the proposal must be received by our Chief
Executive Officer
c/o United
America Indemnity, Ltd., Walker House, 87 Mary Street, George
Town, Grand Cayman KY1-9002, Cayman Islands on or before
March 11, 2010, or it will be deemed untimely
for purposes of
Rule 14a-4(c)
under the Exchange Act and, therefore, the proxies will have the
right to exercise discretionary authority with respect to such
proposal.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive
officers, directors, and persons who own more than ten percent
of a registered class of our equity securities (collectively,
the reporting persons) to file reports of ownership
and changes in ownership with the Securities and Exchange
Commission and to furnish us with copies of these reports. Based
on our review of the copies of the reports that we have
received, and written representations received from certain
reporting persons with respect to the filing of reports on
Forms 3, 4 and 5, we believe that all filings required to
be made by the reporting persons for 2008 were made on a timely
basis except for the following: David J. Myers was late in
making one Form 4 filing to report the payment of tax
liability through the withholding of shares for a tranche of
restricted shares that vested and J. Scott Reynolds was
late in making one Form 4 filing to report the payment of
tax liability through the withholding of restricted shares for a
tranche of shares that vested.
Other
Matters
Our management knows of no matters to be presented at the Annual
General Meeting other than those set forth above and customary
procedural matters. If any other matters should properly come
before the meeting, however, the enclosed proxy confers
discretionary authority with respect to these matters.
Householding
Some banks, brokers, and other nominee record holders may be
participating in the practice of householding proxy
statements and annual reports. This means that only one copy of
our proxy statement or annual report may have been sent to
multiple shareholders in your household. We will promptly
deliver a separate copy of either document to you if you send a
written request to our Chief Executive Officer
c/o United
America Indemnity, Ltd., Walker House, 87 Mary Street, George
Town, Grand Cayman KY1-9002, Cayman Islands or request copies by
calling
(345) 949-0100.
If you want to receive separate copies of the annual report and
proxy statement in the future, or if you are receiving multiple
copies and would like to receive only one copy for your
household, you should contact your bank, broker or other nominee
record holder, or you may contact us at the above address.
* * *
Upon request, we will furnish to record and beneficial owners
of our Class A and Class B common shares, free of
charge, a copy of our annual report on
Form 10-K
(including financial statements and schedules but without
exhibits) for the fiscal year ended December 31, 2008.
Copies of the exhibits to the
Form 10-K
also will be furnished upon request and the payment of a
reasonable fee. All requests should be directed to our Chief
Executive Officer
c/o United
America Indemnity, Inc., Walker House, 87 Mary Street, George
Town, Grand Cayman KY1-9002, Cayman Islands or
e-mailed
to
info@uai.ky.
,
2009
44
PROXY
UNITED AMERICA INDEMNITY, LTD.
This Proxy is solicited on behalf of the Board of Directors.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
The undersigned, revoking all prior proxies, hereby appoints J. Nicole Pryor and Thomas M.
McGeehan as the undersigneds proxy with full power of substitution, to vote all the Class A common
shares and Class B common shares, unless otherwise indicated below, held of record by the
undersigned, at the close of business on , 2009, at the Annual General Meeting of
Shareholders to be held on , 2009, at , local time, at , or at any
adjournments thereof, with all the powers the undersigned would possess if personally present as
follows:
SEE REVERSE SIDE
*DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL*
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
THIS PROXY, WHEN PROPERLY EXECUTED AND TIMELY DELIVERED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1,
FOR PROPOSALS 2 AND 4 AND FOR BOTH OF THE ITEMS INCLUDED IN PROPOSAL 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED IN PROPOSAL 1, FOR
PROPOSALS 2 AND 4 AND FOR BOTH OF THE ITEMS INCLUDED IN PROPOSAL 3.
1.
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Election of directors of United America Indemnity, Ltd.:
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Nominees:
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FOR
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AGAINST
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ABSTAIN
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Saul A. Fox
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Larry A. Frakes
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Stephen A. Cozen
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James R. Kroner
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Michael J. Marchio
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Seth J. Gersch
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Chad A. Leat
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2. To ratify the appointment of PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for 2009 and to authorize the Companys Board of Directors,
acting through its Audit Committee, to set the fees for PricewaterhouseCoopers LLP.
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FOR
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AGAINST
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ABSTAIN
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3.
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Wind River Reinsurance Company, Ltd.
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A.
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Election of directors of Wind River Reinsurance Company, Ltd.
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Nominees:
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FOR all nominees
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WITHHOLD AUTHORITY
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for all nominees
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Alan Bossin
Larry A. Frakes
Troy W. Santora
Janita Burke (Alternate Director)
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For all except vote withheld from the following nominee(s):
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B.
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To ratify appointment of PricewaterhouseCoopers, Hamilton, Bermuda, as
the independent auditor of Wind River Reinsurance Company, Ltd. for 2009.
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FOR
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AGAINST
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ABSTAIN
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4.
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Approval of payment of an arrangement fee and backstop fee to Fox Paine & Company, LLC in
connection with the Companys recently successfully completed rights offering.
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FOR
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AGAINST
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ABSTAIN
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In their discretion, the proxy is authorized to vote upon such other matters as may properly come
before the meeting or any adjournment or postponement thereof.
The signature on this proxy should correspond exactly with the shareholders name as printed to the
left. In the case of joint tenancies, co-executors or co-trustees, all should sign. Persons signing
as attorney, executor, administrator, trustee or guardian should indicate their full title. Please
sign, date and return this proxy in the enclosed postage paid envelope.
Unless otherwise indicated, this proxy represents all Class A and Class B common shares held by the
undersigned. If this proxy is intended to represent less than all of the Class A and Class B
common shares held by the undersigned, indicate the number this proxy represents:
Class A common shares
Class B common shares
* FOLD AND DETACH HERE *
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